Green Electricity Markets as Mechanisms of Public-Goods Provision: Theory and Experimental Evidence

Arnab Mitra and Michael R. Moore
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Michael R. Moore: University of Michigan

Environmental & Resource Economics, 2018, vol. 71, issue 1, No 3, 45-71

Abstract: Abstract Utility-based green electricity programs provide market opportunities for consumers to reduce the carbon footprint of their electricity use. These programs deploy three types of public-goods contribution mechanisms: voluntary contribution, green tariff, and all-or-nothing green tariff (Kotchen and Moore, 2007). We extend the theoretical understanding of the all-or-nothing green tariff mechanism by showing that an assumption of warm-glow preferences is needed to explain widespread participation in programs deploying this mechanism. We conduct the first experimental test to compare the revenue generating capacity of a pure public good (based on the voluntary contribution mechanism) and an impure public good (based on the green tariff mechanism). In experimental play, the voluntary contribution mechanism raises 50% more revenue than the green tariff mechanism. With the all-or-nothing green tariff, experimental play and regression estimates show that a warm-glow preference positively affects participation, as predicted by the theory.

Keywords: Impure public good; Laboratory experiment; Voluntary environmental program; Warm-glow altruism (search for similar items in EconPapers)
JEL-codes: C92 D01 H41 Q42 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10640-017-0136-5

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