Green Consumerism and Non-Profit Firms: A New Approach toward Better Environmental Protection

The objective of this paper is to illustrate how the introduction of environmentally friendly, non-profit firms can improve environmental market outcomes by decreasing pollution from production. In particular such a market setting is shown, quite generally, to deliver increased environmental benefits as the mass of consumers with environmental preferences increases. This result, while seemingly intuitive, has not always resulted from settings featuring solely profit maximizing firms. We highlight the importance of a non-profit firm in the market by contrasting the results obtained in two previous models with our results, which we derive from these same models, imposing the existence of a nonprofit firm in the market. From a policy perspective, the promotion of non-profit firms in markets, along with the establishment of policies aimed at increasing environmental awareness by consumers, may constitute a form of public intervention in favour of the environment as an alternative to those traditionally employed e.g. taxes and subsidies.