Do we follow the leader or the masses? Antecedents of the willingness to pay extra for eco-products

Abstract

This paper reports on an experiment that tests for the existence of peer effects in consumers’ willingness to pay (WTP) for sustainable products. More specifically, we investigate whether the premium for an eco-labeled laundry detergent is sensitive to receiving information about the premium paid by other members of one’s social group. The information manipulations in the experiment test for two distinct types of social influence, i.e., conformist and payoff-biased transmission. We find strong empirical evidence for a conformist transmission. Participants informed about the positive premium paid by the majority of their peers reported a higher premium than individuals not receiving any information. This result shows that previous studies on the WTP for sustainable products, which explain premiums by attitudinal measures and sociodemographic traits, unwarrantedly provide an under-socialized account. The inclusion of social influence variables significantly increases the explanatory power of the model.