Conspicuous Conservation

Consumers have always used consumption to make a statement about their social status, but only recently have researchers began to examine how consumers use consumption to signal more abstract concepts, such as selflessness. Now, researchers are working to explain the growth in consumption of “green” products, examining the idea that people not only purchase products to be environmentally friendly, but also to signal to others that they are doing so.

In “Conspicuous Conservation: The Prius Halo and Willingness to Pay for Environmental Bona Fides,” Steven Sexton and Alison Sexton analyze how much consumers are willing to pay to signal that they are environmentally conscious. Since vehicle ownership is a major signal of social status, the authors turn to the market for Prius hybrid vehicles to estimate the value of a green signal.

In 2010, 48% of the hybrids sold in the U.S. were Toyota Prius. Unlike other hybrid models, such as the Honda Civic or Ford Fusion, the Prius is clearly distinguishable from other non-hybrid models. By comparing consumers’ willingness to pay for Priuses with hybrid Civics in communities across Colorado and Washington, the authors find evidence of “conspicuous conservation”: consumers are willing to pay between $430 and $4,200 to signal that they are green.

The authors emphasize that the Prius premium is not the result of differences in vehicle quality. Priuses do not receive substantially higher green ratings than other similar vehicles. The principle difference is design. The Prius is designed to be instantly recognizable as an environmentally friendly purchase.

Conspicuous conservation carries important implications for policy: the availability of signals can incentivize buyers to purchase private goods that deliver positive externalities. Finding ways to align signaling power with products that increase social welfare could enhance conservation efforts. On the other hand, if buyers are pouring money into purchases of ostensibly green vehicles, while less showy products would yield a higher benefit to the community, incentives are misaligned.

Overall, the research is new, but shows that consumers will pay extra to signal their environmental consciousness. Vehicles tend to be long-lasting products, so the implications of green signaling in auto purchases may indicate that the green “fad” is here to stay.