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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.

Suggested Citation

  • Matthew J. Kotchen & Michael R. Moore, 2004. "Conservation Behavior: From Voluntary Restraint to a Voluntary Price Premium," Department of Economics Working Papers 2004-16, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2004-16
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    More about this item

    Keywords

    Consumer; Electricity; Environment; Households; Individual;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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