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When Is Green Too Rosy? Evidence from a Laboratory Market Experiment on Green Goods and Externalities

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  • Maria Eduarda Fernandes

    () (School of Technology and Management, and CARME, Polytechnic Institute of Leiria, R. Gen. Norton de Matos, 2411-901 Leiria, Portugal)

  • Marieta Valente

    () (NIPE and EEG, Universidade do Minho, R. Bairro do Sol 4, 4710-057 Braga, Portugal)

Abstract

In a context where sustainable consumption and production need to be encouraged, economic experiments can provide significant insights into how individuals consider environmental externalities in their choices and how public policy can foster the environmental public good. Experimental studies aiming to evaluate market mitigation of externalities through the provision of green goods usually choose to adopt neutral language in terms of framing. Our study implements an incentivized economics experiment to explore how supply and demand consider negative externalities. Furthermore, the study addresses the impact of using non-abstract wording when describing negative externalities. Two types of goods can be produced and bought, namely goods generating negative externalities on other consumers (either labelled as B or brown) and goods that cause no harm to others (either labelled A or green). We conclude that the provision of green goods increases from 18.1% in the abstract frame to 70% in the environmental frame. Framing is, therefore, a relevant variable for the outcome of this experimental market. This has important implications for economic experiments aiming to evaluate pro-environmental behaviours and provide policy orientations for the provision of green goods.

Suggested Citation

  • Maria Eduarda Fernandes & Marieta Valente, 2018. "When Is Green Too Rosy? Evidence from a Laboratory Market Experiment on Green Goods and Externalities," Games, MDPI, Open Access Journal, vol. 9(3), pages 1-18, September.
  • Handle: RePEc:gam:jgames:v:9:y:2018:i:3:p:70-:d:169932
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    References listed on IDEAS

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    More about this item

    Keywords

    laboratory experiments; framing effect; abstract instructions; green goods; public goods; external validity; pro-environmental behaviour;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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