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Conservation Behavior: From Voluntary Restraint to a Voluntary Price Premium

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Abstract

This paper provides a theoretical and empirical investigation of conservation behavior that is motivated by concern for the environment. 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 voluntary price premium for goods and services that are more "environmentally friendly." A theoretical model highlights the relationship between such voluntary restraint and a voluntary price premium. 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 model of conservation behavior, as none of the theoretical predictions can be rejected.

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Bibliographic Info

Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2004-16.

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Length: 35 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:wil:wileco:2004-16

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Keywords: Consumer; Electricity; Environment; Households; Individual;

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References

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  1. 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.
  2. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
  3. 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.
  4. 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.
  5. Harbaugh, William T, 1998. "The Prestige Motive for Making Charitable Transfers," American Economic Review, American Economic Association, vol. 88(2), pages 277-82, May.
  6. 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.
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Cited by:
  1. 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.

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