Conservation: From Voluntary Restraint to a Voluntary Price Premium

31 Pages Posted: 21 Dec 2007 Last revised: 1 Jul 2013

See all articles by Matthew J. Kotchen

Matthew J. Kotchen

Yale University; National Bureau of Economic Research (NBER)

Michael R. Moore

University of Michigan - School of Natural Resource

Date Written: December 2007

Abstract

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.

Suggested Citation

Kotchen, Matthew J. and Moore, Michael R., Conservation: From Voluntary Restraint to a Voluntary Price Premium (December 2007). NBER Working Paper No. w13678. Available at SSRN: https://ssrn.com/abstract=1077804

Matthew J. Kotchen (Contact Author)

Yale University ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael R. Moore

University of Michigan - School of Natural Resource ( email )

Ann Arbor, MI 48106-1248
United States
313-647-4337 (Phone)
313-936-2195 (Fax)

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