Implications of green optimism for production and recruitment strategies in a competitive market

Sustainable development has become an important issue for governments and the public. However, a firm's manager may have an optimistic bias about consumers' environmental awareness. Characterizing managers' green optimism and consumers' perception of green products through behavioral theory, this paper establishes a game-theoretical model in which green optimistic/realistic managers compete to sell similar products. We examine the impact of green optimism on green operating strategies in a competitive market by game theory. Furthermore, we shed light on how cap-and-trade regulation adjusts the performance of the industry. The results show that green optimism will always make the firm improve the greenness level of its products, but unilateral optimism may reduce the greenness level of the entire market. Taking the type of managers as exogenous and the firm's hiring strategy as a game, we show that when the quotas of duopoly firms differ greatly, (optimism, optimism) is the only Nash equilibrium; otherwise, (realism, realism) is the only one. Further research shows that the conflict between environmental interests and consumer surplus cannot be reconciled; (optimism, optimism) always leads to better environmental performance but lower consumer surplus. In general, social welfare under dual optimism will be better only when consumers have high environmental awareness.