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Conservation: From Voluntary Restraint to a Voluntary Price Premium

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  • Matthew Kotchen

    ()

  • Michael Moore

Abstract

This paper investigates how concern for the environment translates into predictable patterns of consumer behavior. Two types of behavior are considered. First, individuals who care about environmental quality may voluntarily restrain their consumption of goods and services that generate a negative externality. Second, individuals may choose to pay a price premium for goods and services that are more environmentally benign. A theoretical model identifies a symmetry between such voluntary restraint and a voluntary price premium that mirrors the symmetry between environmental policies based on either quantities (quotas) or prices (taxes). We test predictions of the model in an empirical study of household electricity consumption with introduction of a price-premium, green-electricity program. We find evidence of voluntary restraint and its relation to a voluntary price premium. The empirical results are consistent with the theoretical model of voluntary conservation.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10640-007-9148-x
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 40 (2008)
Issue (Month): 2 (June)
Pages: 195-215

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Handle: RePEc:kap:enreec:v:40:y:2008:i:2:p:195-215

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Conservation behavior; Electricity demand; Renewable energy; D1; Q4; Q5;

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References

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  1. A. E. Peck & O. C. Doering III, 1976. "Voluntarism and Price Response: Consumer Reaction to the Energy Shortage," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 287-292, Spring.
  2. Kotchen, Matthew J. & Moore, Michael R., 2007. "Private provision of environmental public goods: Household participation in green-electricity programs," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 1-16, January.
  3. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  4. Rose, Steven K. & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D. & Clark, Jeremy, 1997. "The Private Provision of Public Goods: Tests of a Provision Point Mechanism for Funding Green Power Programs," Working Papers 127850, Cornell University, Department of Applied Economics and Management.
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  6. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  7. Roe, Brian & Teisl, Mario F. & Levy, Alan & Russell, Matthew, 2001. "US consumers' willingness to pay for green electricity," Energy Policy, Elsevier, vol. 29(11), pages 917-925, September.
  8. Albert Yin-Po Lee, 1981. "Voluntary Conservation and Electricity Peak Demand: A Case Study of the Modesto Irrigation District," Land Economics, University of Wisconsin Press, vol. 57(3), pages 436-447.
  9. Harbaugh, William T, 1998. "The Prestige Motive for Making Charitable Transfers," American Economic Review, American Economic Association, vol. 88(2), pages 277-82, May.
  10. Patricia Champ & Richard Bishop, 2001. "Donation Payment Mechanisms and Contingent Valuation: An Empirical Study of Hypothetical Bias," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(4), pages 383-402, August.
  11. Kahneman, Daniel & Knetsch, Jack L., 1992. "Valuing public goods: The purchase of moral satisfaction," Journal of Environmental Economics and Management, Elsevier, vol. 22(1), pages 57-70, January.
  12. Glazer, A. & Konrad, K.A., 1991. "A Signalling Explanation for Private Charity," GSIA Working Papers 1991-38, Carnegie Mellon University, Tepper School of Business.
  13. Rege, Mari & Telle, Kjetil, 2004. "The impact of social approval and framing on cooperation in public good situations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1625-1644, July.
  14. Hollander, Heinz, 1990. "A Social Exchange Approach to Voluntary Cooperation," American Economic Review, American Economic Association, vol. 80(5), pages 1157-67, December.
  15. Andrew A. Goett & Kathleen Hudson & Kenneth E. Train, 2000. "Customers' Choice Among Retail Energy Suppliers: The Willingness-to-Pay for Service Attributes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-28.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Derek Jeter's Carbon Footprint
    by Matthew E. Kahn in Environmental and Urban Economics on 2011-02-27 21:12:00
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Cited by:
  1. Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.
  2. Julia Blasch & Mehdi Farsi, 2012. "Retail demand for voluntary carbon offsets - A choice experiment among Swiss consumers," IED Working paper 12-18, IED Institute for Environmental Decisions, ETH Zurich.
  3. Jamilah Ahmad & Imran Ali & Georgiana Florentina Grigore & Alin Stancu, 2012. "Studying Consumers’ Ecological Consciousness – A Comparative Analysis of Romania, Malaysia and Pakistan," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(31), pages 84-98, February.
  4. Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, 04.

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