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Green consumption: The impact of trust and pessimism

Maria José Montoya Villalobos

No 2021-9, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper proposes a green consumption model under uncertainty, where we consider green goods as impure public goods and analyze the comparative statics of green consumption. We consider that the environmental efficacity of green goods is uncertain, and we model uncertainty with risk perceptions, specifically with trust (defined as a belief about the veracity of the available information) and pessimism/optimism (which represents the consumer's probability estimation of the realization of the worst possible outcome when consuming green goods). We study their respective impact on green consumption and consider individuals with heterogeneous beliefs. Pessimism has a negative impact on green demand; meanwhile, an increase in trust does not always imply an increase in green demand. We determine the impact of uncertainty on the equilibrium and the socially optimal level of private voluntary provision and show that green consumption decreases with pessimism at the equilibrium. Meanwhile, at the optimum, an increase in pessimism willdecrease the individual's contributions for both the pessimist and optimist consumers. Moreover, we also fi nd that the sub-optimality of the Nash equilibrium, in the presence of an impure public good, is not straightforward under uncertainty.

Keywords: Green consumption; trust; pessimism; uncertainty; impure public goods. (search for similar items in EconPapers)
JEL-codes: D83 D9 H41 Q5 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021
New Economics Papers: this item is included in nep-ore and nep-soc
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