Are Consumers Willing to Pay for Circular Products? The Role of Recycled and Second-Hand Attributes, Messaging, and Third-Party Certification

Abstract

While prior research suggests that consumers are willing to pay higher prices for products with environmentally friendly attributes, this relationship may not apply to “circular economy” products because of their perceived quality issues. The main aim of this study is to assess the circumstance under which consumers pay more for circular economy products. We examine consumers’ willingness to pay (WTP) for circular products in an experimental setting that considers three conditions: consumers’ WTP for garments that are made from either recycled fibers or are reused; WTP when consumers are provided information about the circular product's reduced environmental impacts; WTP when the source of environmental information is third-party verified. We use an online survey and randomly assignment to each one of the three conditions (n = 2,400). Our results suggest that WTP for circular products, both recycled and reused, is lower than the conventional version of the same product. However, when consumers are provided with information about the environmental virtues of the product, and especially when that information is verified by a third-party, consumers’ WTP increases significantly. These findings expand the discussion about consumers’ WTP for environmentally friendly products and how businesses can better market their “circular economy” products.

Keywords: Willingness to pay, consumers, circular economy, circular products, third-party certification, environmental information, experiment

JEL Classification: D11, D12, L67, C90, C93, C83, Q01, Q31, Q51, Q54, Q58, L50