Consumer Willingness to Pay for Eco-labeled Refrigerators

The United States Environmental Protection Agency has used environmental information provision as a policy tool to take advantage of consumer preferences for products that meet higher environmental standards. Such environmental programs include a variety of policies ranging from eco-labeling programs to voluntary environmental agreements between governments and manufacturers. This study analyzes the effects of two such programs - the ENERGY STAR program, an eco-labeling program, and the Climate Leaders program, a voluntary environmental agreement program - on consumer preferences for a household appliance. The study estimates consumer willingness to pay (WTP) for the two programs and examines factors that motivate WTP. A particular interest for the ENERGY STAR program is in determining how the offer of a mail-in rebate affects these preferences. Data used for this study was collected from an online survey conducted in the United States during March and April, 2009. Conditional and random parameter logit models, with product attributes only and with demographic and other individual characteristics as interaction terms, are used to analyze the data. Findings from this study imply that consumers are willing to pay a premium equivalent to a significant portion of the purchase prices for the products approved by either program. Also, it is found that consumers who are more concerned about environmental issues, such as global climate change, and who have confidence in the effects of collective action, are more likely to engage in the purchase of such environmentally friendly products. These results should help government agencies and manufacturers evaluate the effectiveness of environmental information provision programs.