Public Goods Provision in the Presence of Heterogeneous Green Preferences

Abstract

This paper develops a model that incorporates heterogeneity across preference structures where some agents exhibit pro-social behavior -"green" preferences in our examples -and some do not. We compare the relative performance of various policies to increase public goods provision in the presence of this heterogeneity. We find that technology standards are almost always preferable to price instruments, working counter to the usual efficiency advantage of price-based policy. We then extend the model to allow heterogeneity in both green preferences and costs of provision: we show how the two effects compete to determine optimal policy. In the context of energy conservation policy we argue that heterogeneity in green preferences may importantly reduce the efficiency costs of existing consumer-facing technology mandates.

Environmental policy with green consumerism

“…Compared to this literature, we obtain that standards dominate taxes even without behavioral anomalies such as limited attention (Allcott et al 2012) or temptation (Tsvetanov and Segerson 2014). 6 Along the same line, Jacobsen et al (2017) demonstrates the possible superiority of standards in a model of public good provision where agents differ in how much they value the total amount of public good, and where the cost of public good provision is convex. 7 Agents who value more the good provide more of it, creating an inefficient wedge in the marginal cost of production.…”

Using Field Experiments to Address Environmental Externalities and Resource Scarcity: Major Lessons Learned and New Directions for Future Research

“…Spurred by the growing popularity of behavioral economics, more recent manifestations of these models have been augmented to include non-pecuniary motives such as altruism, social pressures, and moral costs (see, e.g., Kotchen, 2006;Kotchen and Moore, 2007;Jacobsen et al, 2012;Ferraro and Price, 2013;Jacobsen et al, 2014;LaRiviere et al, 2014). The introduction of such motivations reflects a fundamental shift in the literature and creates a direct link with work exploring the private provision of public goods (see, e.g., Becker, 1974;Bergstrom et al, 1986;Andreoni, 1988).…”

Using field experiments to address environmental externalities and resource scarcity: major lessons learned and new directions for future research

“…Spurred by the growing popularity of behavioral economics, more recent manifestations of these models have been augmented to include non-pecuniary motives such as altruism, social pressures, and moral costs (see, e.g., Kotchen, 2006;Kotchen and Moore, 2007;Jacobsen et al, 2012;Ferraro and Price, 2013;Jacobsen et al, 2014;LaRiviere et al, 2014). The introduction of such motivations reflects a fundamental shift in the literature and creates a direct link with work exploring the private provision of public goods (see, e.g., Becker, 1974;Bergstrom et al, 1986;Andreoni, 1988).…”