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Conservation: From Voluntary Restraint to a Voluntary Price Premium

  • Matthew Kotchen
  • Michael Moore

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13678.

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Date of creation: Dec 2007
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Publication status: published as Matthew Kotchen & Michael Moore, 2008. "Conservation: From Voluntary Restraint to a Voluntary Price Premium," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 195-215, June.
Handle: RePEc:nbr:nberwo:13678
Note: EEE PE
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  1. 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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  8. Glazer, A. & Konrad, K.A., 1991. "A Signalling Explanation for Private Charity," GSIA Working Papers 1991-38, Carnegie Mellon University, Tepper School of Business.
  9. 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.
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  12. 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.
  13. 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.
  14. Harbaugh, William T, 1998. "The Prestige Motive for Making Charitable Transfers," American Economic Review, American Economic Association, vol. 88(2), pages 277-82, May.
  15. 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.
  16. 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.
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