Assume now that s(B, 0) < C. Then a = 0 (no-one buys green) is a Nash equilibrium: When no-one else buys green, individuals’ sense of personal obligation to do so themselves is weak, implying that the self-image benefit is not strong enough to overcome the personal cost. Denote this equilibrium NE(0). In this situation there are no green consumers, and no-one feels sufficiently bad about it to change their behavior.Assume further that s(B, 1) > C. This means that when everybody else buys green, the individual feels sufficiently responsible that unless she too buys green, the loss of self-image will be so large that she prefers to buy green in spite of the cost C. With these assumptions, this game is a standard coordination game, and a = 1 is also a Nash equilibrium. Denote this NE(1).There is also mixed strategy Nash equilibrium, in which a share a’ chooses green, where a’ isdefined by s(B, a’) = C. In this equilibrium, which we may denote NE(a’), every individual is exactly indifferent, and buys green with probability a’. While the two pure strategy Nash equilibria are evolutionary stable, NE(a’) is not. However, a’ is important because it is a tipping point in the model: Once the number of adopters exceed a’, every individual will prefer to adopt, while no-one will want to adopt as long as the number of adopters is below a’.The existence of two stable Nash equilibria implies that two otherwise identical economiesmay display highly different demand for the green product, even if individuals’ information about the external effects, their preferences for a good self-image, and the way self-image is produces is equal in the two cases.
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