Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides
The notion that individuals seek status among their peers predates economics. A considerable literature has relied on status-seeking motives to explain anomalies in consumption behavior, such as upward sloping demand curves and persistent demand for luxury brand items that provide the same functionality as cheaper alternatives. As social norms change, so may the social response to signals. In particular, there is anecdotal evidence that amid growing concern about climate change and environmental degradation, costly signals of austerity may afford the status once reserved for those who displayed ostentation. In this paper, we develop a theory of conspicuous conservation and test for the presence of a conspicuous conservation effect in vehicle purchase decisions. We further estimate the willingness to pay for the “green halo” generated by signaling type with a purchase of a Toyota Prius, which until 2010 was the only hybrid vehicle on the road that provided standard amenities and featured a unique model design. Using observed variation in model ownership rates across communities in Colorado and Washington, we identify a statistically and economically significant conspicuous conservation effect and estimate a willingness to pay between $430 and $4,200. We relate these findings to a growing literature on green markets and private provision of public goods and discuss the implications of status signaling for optimal investment in conservation and energy efficiency projects.
Steven E. Sexton. 2011. "Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides" The Selected Works of Steven E. Sexton
Available at: http://works.bepress.com/sexton/11