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Willingness to pay lip service? Applying a neuroscience-based method to WTP for green electricity

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  • Herbes, Carsten
  • Friege, Christian
  • Baldo, Davide
  • Mueller, Kai-Markus

Abstract

Consumers' willingness to pay (WTP) represents a central question for providers of renewable energy. Most studies on the subject have used contingent valuation and choice experiments. However, all empirical designs employed to date suffer from serious biases, such as strategic behavior. We introduce a novel neuroscience-based approach to renewable energy-related WTP research, Neuropricing, which eliminates some of these biases. We tested consumers' WTP for two different green electricity products and found WTP for these products to be about 15% above that for a non-green electricity tariff. Our results suggest that Neuropricing is indeed able to eliminate strategic behavior. Moreover, this approach allows for WTP studies with much smaller sample sizes than traditional methods require. The neuroscience methodology can be used by researchers and marketers alike not only for testing the effects of product attributes on WTP but also for evaluating WTP effects of specific messages in marketing communications. Thus it may lead to a better understanding of consumer behavior and hence facilitate more successful marketing of renewable energy.

Suggested Citation

  • Herbes, Carsten & Friege, Christian & Baldo, Davide & Mueller, Kai-Markus, 2015. "Willingness to pay lip service? Applying a neuroscience-based method to WTP for green electricity," Energy Policy, Elsevier, vol. 87(C), pages 562-572.
    • Handle: RePEc:eee:enepol:v:87:y:2015:i:c:p:562-572
    DOI: 10.1016/j.enpol.2015.10.001
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