When Do Firms Switch to Green Packaging? A Game-Theoretic Threshold Model of Consumer Awareness

Over 282 billion pounds of plastic packaging alone are produced each year (globally), and 85 percent becomes waste (Hall, par. 8). This waste can go into the ocean and disrupt a wide array of ecosystems. Plastics are cheap, easy to produce, and recycling is complicated for brands to ensure and very costly. Companies like Coca-Cola are announcing sustainability but continue to rely heavily on plastic packaging. However, there are situations to be modeled and interpreted using game theory, showing how consumers and other firms can influence green packaging. Together past papers suggest that consumer preferences may influence firms' sustainability decisions, and consumers’ willingness to pay for environmental quality can induce voluntary environmental improvement. Our question stems from the search to find what factors can influence the decisions of large firms. In this paper, consumer environmental awareness refers to consumers' preference for environmentally sustainable products and their willingness to reward firms that adopt environmentally friendly packaging. As consumer awareness increases, firms may experience higher demand for sustainable products, changing their incentives to invest in green technologies. This is the question we will research: How environmentally conscious must consumers become before firms voluntarily switch to green packaging? This paper contributes to the literature on environmental economics by examining how consumer environmental awareness influences firms' packaging decisions. The analysis will identify the conditions under which firms voluntarily adopt environmentally friendly packaging and will evaluate whether consumer demand alone is sufficient or whether additional policy intervention may be necessary.