Worse is worse and better doesn't matter?: The effects of favorable and unfavorable environmental information on consumers’ willingness to pay

Abstract

Increasing consumers' willingness to pay (WTP) for environmentally friendly products is a key challenge for sustainable development in market economies. Still, how consumers react to favorable and unfavorable environmental information of different quantitative extents is largely unknown. This research therefore uses prospect theory and competing theoretical foundations to derive pertinent hypotheses and test them by using a multi-level structural equation model. The analysis draws on a surveybased experiment conducted among a representative sample of the German population. Results confirm key assertions of prospect theory. The negative effect caused by unfavorable product carbon footprint information on WTP is stronger than the positive effect caused by respective favorable information. Besides this negativity bias, consumers tend to generally reward or punish deviations of a product's environmental performance from industry average instead of consistently accounting for the size of these deviations. From a sustainable development perspective, the observed patterns highlight a problematic contrast between the need for substantial environmental improvements and limited market incentives for companies. Consequently, political intervention is needed to introduce negative labeling, raise consumers' reference points, set minimum industry standards, and subsidize companies for radical improvements.

The importance of product lifetime labelling for purchase decisions: Strategic implications for corporate sustainability based on a conjoint analysis in Germany

“…In addition, in the long run, consumers might anticipate changes in their living environment that potentially mismatch very long product lifetimes (e.g., change in family size, change of residence and end of own life). Last, the non‐linear labelling effect could also be explained by the negativity bias, which has already been found in settings of sustainability labelling (e.g., Moosmayer, 2012; Petersen et al, 2021; Van Dam & De Jonge, 2015). It refers to the psychological tendency of assigning more weight to negative than to positive stimuli compared to a reference point (Rozin & Royzman, 2001).…”

“…Last, the non-linear labelling effect could also be explained by the negativity bias, which has already been found in settings of sustainability labelling (e.g., Moosmayer, 2012;Petersen et al, 2021;Van Dam & De Jonge, 2015). It refers to the psychological tendency of assigning more weight to negative than to positive stimuli compared to a reference point (Rozin & Royzman, 2001).…”

“…Fifth, as is common in many (conjoint) studies on sustainable consumption (e.g., Heinzle & Wüstenhagen, 2012; Krause & Battenfeld, 2019; Petersen et al, 2021), we used some relevant socio‐demographic variables when setting the sampling quota targets. However, we acknowledge that the quality of the sample could have been further improved, if it had been representative not only in terms of the socio‐demographic characteristics but also in terms of other relevant psychographic characteristics such as political attitude.…”

“…Many aspects of environmental consumption and their strategic implications for businesses have so far experienced ample attention. Research has, for example, highlighted that different types of environmental product information, such as environmental labelling, can influence consumers' perception of product quality (e.g., Ertz et al, 2017; Gleim & Lawson, 2014) as well as their willingness to pay (WTP) (e.g., Heinzle & Wüstenhagen, 2012; Petersen et al, 2021). However, consumers' attitudes and purchase intentions towards environmentally friendly products do not automatically lead to actual environmentally friendly purchase behaviour, as shown in numerous studies on the ‘attitude behaviour’ and ‘intention behaviour’ gap (e.g., Caruana et al, 2016; Jacobs et al, 2018).…”

Perfect apples or sustainable production?—Consumer perspectives from Germany

“…In recent years, societies' awareness for environmental problems, such as species extinction and resource depletion, has increased, as has the demand for sustainably produced food (Schaffner et al, 2015; Tulloch et al, 2021). A growing consumer segment is willing to pay higher prices for products from sustainable production systems, such as extensive or organic cultivation (Petersen et al, 2021; Pouta et al, 2021; Zander & Feucht, 2018). In these sustainable production systems, skin defects caused by pests and fungi can be more difficult to control than in conventional cultivation due to the minimal use of plant protection measures (Holb et al, 2012).…”