Decision Sciences Volume 00 Number 0 xx 2019 © 2019 Decision Sciences Institute Life-Cycle Approach to Environmental Innovation: Cost Structure, Advertising, and Competition Arda Yenipazarli Department of Logistics & Supply Chain Management, Georgia Southern University, Statesboro, GA 30460, e-mail: ayenipazarli@georgiasouthern.edu Asoo Vakharia † Warrington College of Business, University of Florida, Gainesville, FL 32605, e-mail: asoov@ufl.edu Ram Bala Leavey School of Business, Santa Clara University, Santa Clara, CA 95053, e-mail: rbala@scu.edu ABSTRACT Using life-cycle assessment–based methods, products can be differentiated by the en- vironmental performance/impact during their manufacturing and use life-cycle stages. Some products are reported to have higher environmental impact during the use stage, whereas for others, the environmental impact turns out to be higher during the man- ufacturing stage. In this article, we focus on those products in the former category, and consider a duopoly setting where profit-maximizing firms decide on their use- stage environmental innovation efforts, advertising efforts to disclose information on the manufacturing-stage environmental performance of their products, and production quantities. Use-stage environmental innovation not only improves the environmental performance of the product in use, but also increases the value of the product to end- consumers (e.g., through cost-of-use reduction). We examine two distinct cases where such innovation can be achieved through either an up-front capital investment or an in- crease in variable cost of production. Manufacturing-stage environmental performance of a product is typically not visible to end-consumers but could be communicated through advertising efforts. Two well-recognized advertising strategies—namely, com- bative advertising and constructive advertising—are analyzed as alternative information disclosure strategies. We show that when only symmetric strategies are followed by com- peting firms (i.e., when each firm matches its competitor’s advertising approach), firms should always employ constructive advertising strategy to disclose information on the manufacturing-stage environmental performance of their products, and this result holds regardless of the environmental innovation cost structure. When asymmetric strategies are also an option, for marginal cost-intensive innovations, the equilibrium can be char- acterized by asymmetric advertising strategy choices of symmetric firms, whereas for † Corresponding Author. 1