IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v183y2023ics0301421523004093.html
   My bibliography  Save this article

New sustainable product adoption: The role of economic and social factors

Author

Listed:
  • Eslami, Hossein
  • Krishnan, Trichy

Abstract

Sustainability has become a global issue of widespread concern and renewable energy sources are among the most important areas of sustainability research. The solar photovoltaic panel, as a new product, has shown promise but is far from reaching its market potential. This is partly because installation of solar panels requires substantial upfront investment, a critical factor especially for households who want to install them on their rooftops. We use a micro modeling approach to study the adoption of rooftop solar panels among households. We model household adoption as a forward-looking investment in a new sustainable product. Since rooftop solar panels are easily observable in the neighborhood, they enable potential adopters to infer about the investment return of new installations without explicitly asking anyone. We build this social learning mechanism in our model and estimate it using a rich household-level data set on the adoption timings of the solar panels in Germany. Besides, an aggregate version of our micromodel has been proposed to estimate the parameters of adoption using aggregate data. We have contrasted the results of the two models. Through a series of counterfactual policy experiments, we demonstrate the effectiveness of different incentive policies including Feed-In Tariff (FIT). Through policy experiments we show that by understanding the underlying adoption mechanisms policy makers can choose the most efficient incentive policy to accelerate the adoption of solar panels. Our proposed models (micromodel and aggregate model) are general enough to be adapted to other new sustainable products by incorporating economic and social factors.

Suggested Citation

  • Eslami, Hossein & Krishnan, Trichy, 2023. "New sustainable product adoption: The role of economic and social factors," Energy Policy, Elsevier, vol. 183(C).
    • Handle: RePEc:eee:enepol:v:183:y:2023:i:c:s0301421523004093
    DOI: 10.1016/j.enpol.2023.113824
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421523004093
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2023.113824?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gautam Gowrisankaran & Marc Rysman, 2012. "Dynamics of Consumer Demand for New Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 120(6), pages 1173-1219.
    2. Delgado, Michael S. & Harriger, Jessica L. & Khanna, Neha, 2015. "The value of environmental status signaling," Ecological Economics, Elsevier, vol. 111(C), pages 1-11.
    3. Scott K. Shriver, 2015. "Network Effects in Alternative Fuel Adoption: Empirical Analysis of the Market for Ethanol," Marketing Science, INFORMS, vol. 34(1), pages 78-97, January.
    4. Garth Heutel & Erich Muehlegger, 2015. "Consumer Learning and Hybrid Vehicle Adoption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 125-161, September.
    5. Frank M. Bass & Trichy V. Krishnan & Dipak C. Jain, 1994. "Why the Bass Model Fits without Decision Variables," Marketing Science, INFORMS, vol. 13(3), pages 203-223.
    6. Yuan, Xiaodong & Li, Xiaotao, 2021. "Mapping the technology diffusion of battery electric vehicle based on patent analysis: A perspective of global innovation systems," Energy, Elsevier, vol. 222(C).
    7. Islam, Towhidul, 2014. "Household level innovation diffusion model of photo-voltaic (PV) solar cells from stated preference data," Energy Policy, Elsevier, vol. 65(C), pages 340-350.
    8. Ashley Langer & Derek Lemoine, 2022. "Designing Dynamic Subsidies to Spur Adoption of New Technologies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(6), pages 1197-1234.
    9. Tveten, Åsa Grytli & Bolkesjø, Torjus Folsland & Martinsen, Thomas & Hvarnes, Håvard, 2013. "Solar feed-in tariffs and the merit order effect: A study of the German electricity market," Energy Policy, Elsevier, vol. 61(C), pages 761-770.
    10. Wustenhagen, Rolf & Wolsink, Maarten & Burer, Mary Jean, 2007. "Social acceptance of renewable energy innovation: An introduction to the concept," Energy Policy, Elsevier, vol. 35(5), pages 2683-2691, May.
    11. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    12. Gautier, Axel & Hoet, Brieuc & Jacqmin, Julien & Van Driessche, Sarah, 2019. "Self-consumption choice of residential PV owners under net-metering," Energy Policy, Elsevier, vol. 128(C), pages 648-653.
    13. Ma, Rufei & Cai, Huan & Ji, Qiang & Zhai, Pengxiang, 2021. "The impact of feed-in tariff degression on R&D investment in renewable energy: The case of the solar PV industry," Energy Policy, Elsevier, vol. 151(C).
    14. Grant Miller & A. Mushfiq Mobarak, 2015. "Learning About New Technologies Through Social Networks: Experimental Evidence on Nontraditional Stoves in Bangladesh," Marketing Science, INFORMS, vol. 34(4), pages 480-499, July.
    15. Dan Horsky, 1990. "A Diffusion Model Incorporating Product Benefits, Price, Income and Information," Marketing Science, INFORMS, vol. 9(4), pages 342-365.
    16. Karneyeva, Yuliya & Wüstenhagen, Rolf, 2017. "Solar feed-in tariffs in a post-grid parity world: The role of risk, investor diversity and business models," Energy Policy, Elsevier, vol. 106(C), pages 445-456.
    17. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-784, July.
    18. Rabik Ar Chatterjee & Jehoshua Eliashberg, 1990. "The Innovation Diffusion Process in a Heterogeneous Population: A Micromodeling Approach," Management Science, INFORMS, vol. 36(9), pages 1057-1079, September.
    19. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
    20. John H. Roberts & Glen L. Urban, 1988. "Modeling Multiattribute Utility, Risk, and Belief Dynamics for New Consumer Durable Brand Choice," Management Science, INFORMS, vol. 34(2), pages 167-185, February.
    21. Oleg Melnikov, 2013. "Demand For Differentiated Durable Products: The Case Of The U.S. Computer Printer Market," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1277-1298, April.
    22. Bryan Bollinger, 2015. "Green technology adoption: An empirical study of the Southern California garment cleaning industry," Quantitative Marketing and Economics (QME), Springer, vol. 13(4), pages 319-358, December.
    23. Kowalska-Pyzalska, Anna, 2018. "What makes consumers adopt to innovative energy services in the energy market? A review of incentives and barriers," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 3570-3581.
    24. Palm, Jenny, 2018. "Household installation of solar panels – Motives and barriers in a 10-year perspective," Energy Policy, Elsevier, vol. 113(C), pages 1-8.
    25. Sommerfeldt, Nelson & Lemoine, Ida & Madani, Hatef, 2022. "Hide and seek: The supply and demand of information for household solar photovoltaic investment," Energy Policy, Elsevier, vol. 161(C).
    26. Bryan Bollinger, 2015. "Green technology adoption: An empirical study of the Southern California garment cleaning industry," Quantitative Marketing and Economics (QME), Springer, vol. 13(4), pages 319-358, December.
    27. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    28. Brett R. Gordon, 2009. "A Dynamic Model of Consumer Replacement Cycles in the PC Processor Industry," Marketing Science, INFORMS, vol. 28(5), pages 846-867, 09-10.
    29. Bryan Bollinger & Kenneth Gillingham, 2012. "Peer Effects in the Diffusion of Solar Photovoltaic Panels," Marketing Science, INFORMS, vol. 31(6), pages 900-912, November.
    30. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in western European Union countries," Energy Policy, Elsevier, vol. 38(7), pages 3297-3308, July.
    31. Baghestani, Hamid, 2021. "Predicting growth in US durables spending using consumer durables-buying attitudes," Journal of Business Research, Elsevier, vol. 131(C), pages 327-336.
    32. Duan, Hongbo & Zhang, Gupeng & Wang, Shouyang & Fan, Ying, 2018. "Peer interaction and learning: Cross-country diffusion of solar photovoltaic technology," Journal of Business Research, Elsevier, vol. 89(C), pages 57-66.
    33. Sheth, Jagdish N. & Newman, Bruce I. & Gross, Barbara L., 1991. "Why we buy what we buy: A theory of consumption values," Journal of Business Research, Elsevier, vol. 22(2), pages 159-170, March.
    34. Mignon, Ingrid & Winberg, Lisa, 2023. "The role of public energy advising in sustainability transitions – empirical evidence from Sweden," Energy Policy, Elsevier, vol. 177(C).
    35. Hui Li, 2019. "Intertemporal Price Discrimination with Complementary Products: E-Books and E-Readers," Management Science, INFORMS, vol. 67(6), pages 2665-2694, June.
    36. Zhang, Yanquan & Chang, Ruidong & Zuo, Jian & Shabunko, Veronika & Zheng, Xian, 2023. "Regional disparity of residential solar panel diffusion in Australia: The roles of socio-economic factors," Renewable Energy, Elsevier, vol. 206(C), pages 808-819.
    37. Bunea, Anita M. & Della Posta, Pompeo & Guidolin, Mariangela & Manfredi, Piero, 2020. "What do adoption patterns of solar panels observed so far tell about governments’ incentive? Insights from diffusion models," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    38. Zhang, Alex Hongliang & Sirin, Selahattin Murat & Fan, Conglai & Bu, Maoliang, 2022. "An analysis of the factors driving utility-scale solar PV investments in China: How effective was the feed-in tariff policy?," Energy Policy, Elsevier, vol. 167(C).
    39. Sahoo, Debajani & Harichandan, Sidhartha & Kar, Sanjay Kumar & S, Sreejesh, 2022. "An empirical study on consumer motives and attitude towards adoption of electric vehicles in India: Policy implications for stakeholders," Energy Policy, Elsevier, vol. 165(C).
    40. Tülin Erdem & Michael Keane & T. Öncü & Judi Strebel, 2005. "Learning About Computers: An Analysis of Information Search and Technology Choice," Quantitative Marketing and Economics (QME), Springer, vol. 3(3), pages 207-247, September.
    41. Wustenhagen, Rolf & Bilharz, Michael, 2006. "Green energy market development in Germany: effective public policy and emerging customer demand," Energy Policy, Elsevier, vol. 34(13), pages 1681-1696, September.
    42. Inseong Song & Pradeep Chintagunta, 2003. "A Micromodel of New Product Adoption with Heterogeneous and Forward-Looking Consumers: Application to the Digital Camera Category," Quantitative Marketing and Economics (QME), Springer, vol. 1(4), pages 371-407, December.
    43. Rubio, Francisco & Llopis-Albert, Carlos & Valero, Francisco & Besa, Antonio José, 2020. "Sustainability and optimization in the automotive sector for adaptation to government vehicle pollutant emission regulations," Journal of Business Research, Elsevier, vol. 112(C), pages 561-566.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brett R. Gordon, 2009. "A Dynamic Model of Consumer Replacement Cycles in the PC Processor Industry," Marketing Science, INFORMS, vol. 28(5), pages 846-867, 09-10.
    2. Pradeep K. Chintagunta & Harikesh S. Nair, 2011. "Structural Workshop Paper --Discrete-Choice Models of Consumer Demand in Marketing," Marketing Science, INFORMS, vol. 30(6), pages 977-996, November.
    3. Inseong Song & Pradeep Chintagunta, 2003. "A Micromodel of New Product Adoption with Heterogeneous and Forward-Looking Consumers: Application to the Digital Camera Category," Quantitative Marketing and Economics (QME), Springer, vol. 1(4), pages 371-407, December.
    4. Chaab, Jafar & Salhab, Rabih & Zaccour, Georges, 2022. "Dynamic pricing and advertising in the presence of strategic consumers and social contagion: A mean-field game approach," Omega, Elsevier, vol. 109(C).
    5. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
    6. Jean-Pierre Dubé & Günter Hitsch & Pranav Jindal, 2014. "The Joint identification of utility and discount functions from stated choice data: An application to durable goods adoption," Quantitative Marketing and Economics (QME), Springer, vol. 12(4), pages 331-377, December.
    7. Vardit Landsman & Moshe Givon, 2010. "The diffusion of a new service: Combining service consideration and brand choice," Quantitative Marketing and Economics (QME), Springer, vol. 8(1), pages 91-121, March.
    8. Olivier De Groote & Frank Verboven, 2019. "Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems," American Economic Review, American Economic Association, vol. 109(6), pages 2137-2172, June.
    9. Masakazu Ishihara & Andrew T. Ching, 2019. "Dynamic Demand for New and Used Durable Goods Without Physical Depreciation: The Case of Japanese Video Games," Marketing Science, INFORMS, vol. 38(3), pages 392-416, May.
    10. Timothy Derdenger & Vineet Kumar, 2019. "Estimating dynamic discrete choice models with aggregate data: Properties of the inclusive value approximation," Quantitative Marketing and Economics (QME), Springer, vol. 17(4), pages 359-384, December.
    11. Olivier Toubia & Jacob Goldenberg & Rosanna Garcia, 2014. "Improving Penetration Forecasts Using Social Interactions Data," Management Science, INFORMS, vol. 60(12), pages 3049-3066, December.
    12. Yufeng Huang, 2019. "Learning by Doing and the Demand for Advanced Products," Marketing Science, INFORMS, vol. 38(1), pages 107-128, January.
    13. Jean-Pierre H. Dubé & Günter J. Hitsch & Pradeep K. Chintagunta, 2010. "Tipping and Concentration in Markets with Indirect Network Effects," Marketing Science, INFORMS, vol. 29(2), pages 216-249, 03-04.
    14. Hongmin Li & Dieter Armbruster & Karl G. Kempf, 2013. "A Population-Growth Model for Multiple Generations of Technology Products," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 343-360, July.
    15. Bart Bronnenberg & Jean Dubé & Carl Mela & Paulo Albuquerque & Tulin Erdem & Brett Gordon & Dominique Hanssens & Guenter Hitsch & Han Hong & Baohong Sun, 2008. "Measuring long-run marketing effects and their implications for long-run marketing decisions," Marketing Letters, Springer, vol. 19(3), pages 367-382, December.
    16. Timothy Derdenger & Vineet Kumar, 2013. "The Dynamic Effects of Bundling as a Product Strategy," Marketing Science, INFORMS, vol. 32(6), pages 827-859, November.
    17. Park, Minjung, 2019. "Selection bias in estimation of peer effects in product adoption," Journal of choice modelling, Elsevier, vol. 30(C), pages 17-27.
    18. Anita M. Bunea & Mariangela Guidolin & Piero Manfredi & Pompeo Della Posta, 2022. "Diffusion of Solar PV Energy in the UK: A Comparison of Sectoral Patterns," Forecasting, MDPI, vol. 4(2), pages 1-21, April.
    19. Christopher J. Blackburn & Mallory E. Flowers & Daniel C. Matisoff & Juan Moreno‐Cruz, 2020. "Do Pilot and Demonstration Projects Work? Evidence from a Green Building Program," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(4), pages 1100-1132, September.
    20. Gonca P. Soysal & Lakshman Krishnamurthi, 2012. "Demand Dynamics in the Seasonal Goods Industry: An Empirical Analysis," Marketing Science, INFORMS, vol. 31(2), pages 293-316, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:183:y:2023:i:c:s0301421523004093. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.