Fighting over environmental salience

When consumers prefer to buy goods with high environmental quality and firms differ in their environmental qualities, firms have incentives to fight over environmental salience and thereby influence consumers' attention to the environmental dimension of the goods. A green firm prefers environmental quality to be salient, while a brown firm prefers environmental quality to remain shrouded. We model the firms' fight over salience as an advertising contest. We show that the firm with the competitive advantage invests more into the salience contest. Whether such a contest increases social welfare depends on the level of environmental differentiation and the marginal damage of emissions. In addition, we show that the contest is an (imperfect) substitute for emission taxes and subsidies and that minimum standards may increase emissions and decrease welfare.