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Advertising and Environmental Stewardship: Evidence from the BP Oil Spill

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  • Lint Barrage
  • Eric Chyn
  • Justine Hastings

Abstract

This paper explores whether private markets can incentivize environmental stewardship. We examine the consumer response to the 2010 BP oil spill and test how BP's investment in the 2000–2008 "Beyond Petroleum" green advertising campaign affected this response. We find evidence consistent with consumer punishment: BP station margins and volumes declined by 2.9 cents per gallon and 4.2 percent, respectively, in the month after the spill. However, pre-spill advertising significantly dampened the price response, and may have reduced brand switching by BP stations. These results indicate that firms may have incentives to engage in green advertising without investments in environmental stewardship.

Suggested Citation

  • Lint Barrage & Eric Chyn & Justine Hastings, 2020. "Advertising and Environmental Stewardship: Evidence from the BP Oil Spill," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 33-61, February.
  • Handle: RePEc:aea:aejpol:v:12:y:2020:i:1:p:33-61
    DOI: 10.1257/pol.20160555
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    3. Cano-Urbina, Javier & Clapp, Christopher M. & Willardsen, Kevin, 2019. "The effects of the BP Deepwater Horizon oil spill on housing markets," Journal of Housing Economics, Elsevier, vol. 43(C), pages 131-156.
    4. Wang, Zhongmin & Lee, Alvin & Polonsky, Michael, 2015. "Egregiousness and Boycott Intensity: Evidence from the BP Deepwater Horizon Oil Spill," Discussion Papers dp-15-06, Resources For the Future.
    5. Zhongmin Wang & Alvin Lee & Michael Polonsky, 2018. "Egregiousness and Boycott Intensity: Evidence from the BP Deepwater Horizon Oil Spill," Management Science, INFORMS, vol. 64(1), pages 149-163, January.
    6. Inge van den Bijgaart & Davide Cerruti, 2020. "The effect of information on market activity; evidence from vehicle recalls," CER-ETH Economics working paper series 20/343, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    7. Ben Gilbert & Alexander James & Jason F. Shogren, 2018. "Corporate apology for environmental damage," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 51-81, February.
    8. Harrison Hong & Inessa Liskovich, 2015. "Crime, Punishment and the Halo Effect of Corporate Social Responsibility," NBER Working Papers 21215, National Bureau of Economic Research, Inc.
    9. Anthony Heyes & Marcel Oestreich, 2017. "The Optimal NGO Chief: Strategic Delegation in Social Advocacy," Working Papers 1701, Brock University, Department of Economics.
    10. Joseph L. Scarpaci & Benjamin K. Sovacool & Ronnie Ballantyne, 2016. "A Critical Review of the Costs of Advertising: a Transformative Consumer Research Perspective," Journal of Consumer Policy, Springer, vol. 39(2), pages 119-140, June.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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