Consumer Labeling and Motivation Crowding-OutEPA Grant Number: R832849
Title: Consumer Labeling and Motivation Crowding-Out
Investigators: Clark, Christopher D. , Hanemann, Michael , Jensen, Kimberly L. , Russell, Clifford , Yen, Steven
Institution: University of Tennessee - Knoxville , University of California - Berkeley , Vanderbilt University
EPA Project Officer: Michaud, Jayne
Project Period: April 10, 2006 through April 9, 2009
Project Amount: $309,171
RFA: Environmental Behavior and Decisionmaking: Determining the Effectiveness of Environmental Information Disclosure and Provision (2005) RFA Text | Recipients Lists
Research Category: Economics and Decision Sciences
The primary objective of this project is to explore consumer reactions to environmental product labels on market goods. This exploration will focus on two particular aspects of these reactions. First, consumer willingness-to-pay for the reduction of greenhouse gas emissions associated with the production of energy through the choice of either energy-saving products or production processes will be estimated. Given the indirect nature by which these measures are derived, their real value will be in comparing the relative effect of reductions through either energy savings or changes in production practices. Second, the effect of a product label based on an environmental attribute with both public and private benefits (e.g., emissions reductions and cost savings associated with a more energy-efficient appliance) has on consumers will be contrasted with that of a label based on an attribute with purely public benefits (e.g., reduced emissions associated with a more energy-efficient production process or the use of renewable energy in such production). A well-developed body of research suggests that the inclusion of relatively small extrinsic rewards (such as cost savings from an energy-efficient appliance) can actually decrease the effect of existing intrinsic rewards (such as the internal motivation for consuming an environmentally friendly product). This effect, commonly referred to as motivation crowding out, has important implications for the selection, design and marketing of environmental attributes or labels.
The exploration of consumer responses will involve the use of conjoint analysis (contingent choice) surveys in which sub-samples of respondents reveal their preferences in a series of comparisons between varieties of an energy-using home appliance. The appliance varieties will be distinguished by different levels of privately relevant attributes, including price, and also by whether or not they have obtained an environmental “seal-of-approval” label. The benefits associated with the label will vary across sub-samples. In two sub-samples, both private and public benefits (e.g., energy cost savings and emissions reductions) will be associated with the label, while only public benefits will feature in the other two. The magnitude of the benefits will vary between a low and a high value, generating four separate sub-samples. Responses will be analyzed using multinomial logit methods. To allow for heterogeneity of respondents, models in which logit coefficients vary across individuals, either continuously using random coefficient methods, or over a finite number of “classes,” using finite mixture methods, will be used.
We expect to find that respondent willingness-to-pay is, on average, increased by the existence of public benefits, that this increase is tied to demographic and attitudinal variables, and that this effect is increased by the addition of substantial private benefits, but actually be reduced by the addition of a modest private benefit. Either way, the results of these experiments have the potential to greatly influence both the design and marketing of a variety of information disclosure programs and to evaluate the potential of these programs for altering individual behavior.