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Advisor(s)
Abstract(s)
In this paper, we incorporate environment issues into a quality and quantity competition between two asymmetric
restaurants We apply Game Theory (Game Theory is the study of mathematical models of strategic interaction between
rational decision-makers) to study a competition of restaurant industry, defining a three-stage model. We compute the
subgame perfect equilibrium, and we analyse the effects of the effects of difference of restaurants' reputation on the
equilibrium outputs. As a result, we get that the increase in the reputation difference between restaurants reduces the
quality and output of the small restaurant, and increases the quality and output of the large restaurant, being the overall
effect an increase in the total quality and the aggregate quantity in the market. Moreover, the increase in the reputation
difference between restaurants decreases profits of the small restaurant and raises both social welfare and profits of the
large restaurant. In conclusion, restaurants' reputation has an important impact on the environmental deterioration. The
effects of the valuation of the environment by the government are also investigated. We show that as the government values
more the environment, emission standards are reduced, as well as quality and quantity of meals produced by both small and
large restaurants. Furthermore, the increase in the valuation of the environment by the government raises social welfare
and decreases profits of the large restaurant, while it is ambiguous for the small restaurant's profits. So, governments have
tools they can use to control environmental degradation.
Description
Keywords
Game theory Duopoly market Slow food Green environment Restaurant sustainability
Pedagogical Context
Citation
Publisher
Academic Conferences and Publishing International