The price premium of an environmentally friendly product

Abstract

The relationship between marketing and the environment has recently received considerable attention. Much of the literature in this field deals with the premia that consumers are willing to pay for environmentally friendly products as well as the characteristics that describe these consumers. The methods used for estimating these premia are, however, methodolog1cally flawed. This article presents a model for calculating premia on the basis of part-worth utilities derived from conjoint analysis. The authors find that racial and educational differences exist in willingness to pay a premium. These differences persist even when variances in other variables (for example, income) are controlled.