(E3 ) Working Papers Series
E3 Working Paper WP-029 Abstract
WP-029: Steven E. Sexton and Alison L. Sexton, "Conspicuous Conservation: The Prius Halo and Willingness to Pay for Environmental Bona Fides" (November 2011) Full Paper
A considerable literature on conspicuous consumption has relied on status-seeking motives to explain anomalies in consumer behavior, such as upward sloping demand curves and persistent demand for luxury brand items that provide the same functionality as cheaper alternatives. This paper develops a theory of conspicuous conservation, a phenomenon attributable to increasing concern about environmental damage and climate change in which individuals seek status through displays of austerity rather than ostentation. We test for the presence of a conspicuous conservation effect in vehicle purchase decisions and estimate the willingness to pay for the "green" signal generated by the Toyota Prius, which until 2010 was the only hybrid vehicle on the road that provided standard amenities and a unique and recognizable 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 mean willingness to pay for the green signal in the range of $430 to $1,300 in Washington and $1,400 to $4,200 in Colorado. We relate these findings to a growing literature on green markets and consider the implications of signaling motives for the private provision of public goods and for achieving efficient investment in conservation projects.