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Social Network Effects and Green Consumerism

Author

Listed:
  • Dominic Hauck

    (VU University Amsterdam)

  • Erik Ansink

    (VU University Amsterdam)

  • Jetske Bouma

    (PBL Netherlands Environmental Assessment Agency)

  • Daan van Soest

    (Tilburg University)

Abstract

One of the drivers of green consumerism are social network externalities that are associated with buying 'green' because green consumerism is fashionable, or because of reputation effects. We analyze how the strength of this social network effect impacts green consumerism, environmental externalities and total welfare. We discuss a model where products are differentiated according to their environmental quality, where the production of green products generates positive externalities to all, and where those consumers purchasing a green product variety receive the additional benefits of being a member of the network of green consumers. Depending on the strength of the social network effect, we show that (a) firms may produce lower quality, (b) the market may generate fewer positive environmental externalities, and (c) total welfare may deteriorate. The main policy implication is that if there is a network effect, regulators should choose a stricter minimum environmental quality standard.

Suggested Citation

  • Dominic Hauck & Erik Ansink & Jetske Bouma & Daan van Soest, 2014. "Social Network Effects and Green Consumerism," Tinbergen Institute Discussion Papers 14-150/VIII, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20140150
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    References listed on IDEAS

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    Cited by:

    1. Charu Grover & Sangeeta Bansal, 2021. "Effect of green network and emission tax on consumer choice under discrete continuous framework," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(4), pages 641-666, October.
    2. Marzena Czarnecka & Grzegorz Kinelski & Magdalena Stefańska & Mateusz Grzesiak & Borys Budka, 2022. "Social Media Engagement in Shaping Green Energy Business Models," Energies, MDPI, vol. 15(5), pages 1-19, February.

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    More about this item

    Keywords

    Quality Differentiation; Social Network Effect; Minimum Environmental Quality Standard;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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