The ethical consumer: How much is sustainability worth to consumers?

We investigate if consumers value sustainable production of goods by measuring the increase in their willingness to accept (WTA) for backpacks, when they are either informed about sustainability aspects in the production or not, using the incentive compatible Becker-DeGroot-Marschak auction (BDM) (Becker, DeGroot, & Marschak, 1964). Participants are given a backpack that they can immediately sell back in two BDM auction rounds. After inspecting the backpack, participants state their minimum selling price in a first pre-treatment auction round. Then, depending on the treatment, participants receive different information about the backpack. In the control treatment, participants are given information about functionality and wearing comfort of the backpack, e.g. being water-repellent. In the sustainability treatment, participants are additionally informed that the production of the backpack was socially and environmentally sustainable. In a second post-treatment auction round, they are then again asked to state their minimum selling price. Subsequently, a number is randomly drawn to be the price. If participants’ bid is higher than the price, they keep the backpack. If their bid is equal to or lower than the price, they must sell the backpack at the drawn price.

We create variation by handing out different informational sheets about the backpack. The sheets contain a picture of the backpack on the left. On the right, participants in the control treatment find the following text with three bullet points:
The backpack is characterized by
• high functionality (e.g. expandable from 26 to 33 liters, padded laptop compartment, 2 accesses to main compartment: rolltop system and circulating zipper),
• outstanding wearing comfort (e.g. ergonomic shoulder straps, padded back section, removable and adjustable chest strap),
• water-repellence.
In the sustainability treatment, the following two bullet points are added to the above description.
• a socially compatible production, i.e. regular auditing of working conditions of the backpack production by the independent third party Fair Wear Foundation (including occupational safety reviews, employee training and no child labor), and long and transparent partnership with suppliers,
• an ecologically compatible production (e.g. fabrics made from 100% recycled PET bottles, backpack free of PFCs harmful to the environment and health and continuous reduction of negative environmental impacts in production as certified by the independent third party bluesign)

2019-08-14

2019-10-31

Difference in willingness to accept

We investigate if consumers value sustainable production of goods by measuring the increase in their willingness to accept (WTA) for backpacks, when they are either informed about sustainability aspects in the production or not, using the incentive compatible Becker-DeGroot-Marschak auction (BDM) (Becker, DeGroot, & Marschak, 1964). Participants are given a backpack that they can immediately sell back in two BDM auction rounds. After inspecting the backpack, participants state their minimum selling price in a first pre-treatment auction round. Then, depending on the treatment, participants receive different information about the backpack. In the control treatment, participants are given information about functionality and wearing comfort of the backpack, e.g. being water-repellent. In the sustainability treatment, participants are additionally informed that the production of the backpack was socially and environmentally sustainable. In a second post-treatment auction round, they are then again asked to state their minimum selling price. Subsequently, a number is randomly drawn to be the price. If participants’ bid is higher than the price, they keep the backpack. If their bid is equal to or lower than the price, they must sell the backpack at the drawn price.

Details:
The experiment is conducted at university campuses in Cologne. The experimenter asks people that pass by the experimenter’s stand if they want to participate in a consumer survey that is conducted by the University of Cologne. They are told that, if they are drawn in a lottery, they can win a backpack or money. If they agree to participate, they are randomly allocated to either the control or the sustainability treatment. Then, participants are given detailed written instruction that are read aloud to them by the experimenter. To test and enhance participants’ comprehension of the method, one training round with an apple is conducted. Then, participants make their pre-treatment bid. The backpack is available at the experimenter’s stand for participants to inspect. Afterwards, depending on the treatment, participants receive one of two different informational sheets about the backpack, either with or without sustainability related information. Then, participants make their post-treatment bid. In the end, participants answer various questions: They are asked if they know the brand (yes/no) and its CSR activities (5 point Likert scale), if they like the design (5 point Likert scale), about their current need of a backpack (5 point Likert scale) and how well they know the backpack market (5 point Likert scale). Then, they are asked to answer demographical questions about gender, age, vocational situation, field of studies and highest educational degree. Finally, they are asked if they usually buy socially and environmentally sustainable clothes and accessories (2 questions: 5 point Likert scale) and if they have paid more in the past for clothes and accessories that were produced socially and environmentally sustainably (2 questions: 5 point Likert scale). Participants that are allocated to the sustainability treatment are asked additionally if they know Fair Wear Foundation and bluesign (2 questions: yes/no).

After subjects agree to participate in the experiment, the experimenter randomly draws a card from an envelope that determines the treatment group.

Individual

No

n.a.

360 individuals

180 individuals

Based on power analysis in which we used data from a pilot (n=20) of the control treatment, we determined n=360 to have a power of 80 percent for a minimal detectable effect size of 5%. The minimal detectable effect size of 5% refers to a between treatment increase of the post-treatment bid.