Stiftelsen Frischsenteret for samfunnsøkonomisk forskning Ragnar Frisch Centre for Economic Research Green consumers and public policy: On socially contingent moral motivation Karine Nyborg, Richard B. Howarth, and Kjell Arne Brekke

Frischsenteret Green consumers Consumers appear to be willing to pay more for products produces in environment-friendly ways –Dolhpin-safe tuna, paper, detergents But: Some ”green” markets are less successful –Green electricity in the USA: Surveys indicated that percent would participate, 1 percent did Would Homo Economicus buy green goods? –Caring about the environment: Insufficient explanation –Social pressure: Please others, avoid social disapproval (can get good or viscious circles) –Good conscience: ”The warm glow of giving” Moral motivation (Brekke, Kverndokk and Nyborg 2003): –Consumers prefer a self-image as socially responsible

Frischsenteret Moral motivation In this paper: –Internalized moral motivation: Disregard social sanctions –Green consumers are motivated by a preference for keeping a self-image as a socially responsible individual –Build on insights from social psychology Important results: –Others’ behavior is important –Good/viscious circles –Temporary policy can achieve permanent changes –Taxes can crowd in/crowd out moral motivation –Attitude campaigns may work

Frischsenteret Schwarz’ theory of moral decision- making Shalom Schwarz (1970, 1977): A social psychological analysis of moral decision- making Conditions for making moral decisions: –There exists a norm (a behavioral rule) –The norm is activated only if the consumer is aware that his choice will matter to others – external effects (Awareness of Consequences) –The activated norm can change behavior only if the consumer accepts a personal responsibility for the issue (Ascription of Responsibility).

Frischsenteret Personal responsibility No-one can take responsibility for everything –All societies must have some kind of division of labor –Partly defined through laws/ regulations and formal contracts, partly via norms/conventions, known by experience If there is no formal rule clarifying who is responsible: 1.What is common in my society? 2.What is it fair that I take responsibility for? (Reciprocity/fairness: Fehr, Bolton/Ockenfels, others) Both 1 and 2: ”I take responsibility if others do”.

Frischsenteret The model Identical consumers Green is preferred if s(B, a) > C – where s(B, a), the self-image gain if choosing green, is increasing in the positive external effects of buying green, B, and in the share of others buying green, a – and C is the extra cost of buying green Two stable Nash equilibria: – Everybody buys green – No-one buys green Consumers revise their strategies only now and then

Frischsenteret Increases in the share of green consumers s(B,a’) = C

Frischsenteret Conclusions Even if social approval is disregarded, green consumers may display herd behavior Taxes – even temporary – may work, but they may also crowd out moral motivation completely – depends on framing Advertising and information may have huge and permanent effects – making consumers susceptible to manipulation from marketers Success is more likely for a green product if the external effects and others’ participation are easily observed/visualized (recycling vs. green electricity)