Essays on Sustainable Product Consumption

Abstract

In recent years, consumers and firms alike have become increasingly aware of the importance of sustainability (across multiple facets, including economic, social, and environmental dimensions) on the well-being of our planet and our communities. I focus on investigating the determinants of demand for sustainable products and the downstream consequences for firms. In the first essay, I examine consumer loyalty towards sustainable products and show consumers on average exhibit loyalty towards sustainability claims themselves but less towards the brand itself when the product has a sustainability claim. I analyze theoretical implications and show greater switching between sustainable brands can lead to lower margins for sustainable products relative to non-sustainable ones. In the second essay, I assess the role of the “profit potential” (which is determined by equilibrium quantity, price, and price elasticity) for sustainable products and the availability of sustainable products in explaining large heterogeneity in sustainable product market share in the U.S. I show profit potential is very predictive of product availability. However, even after controlling for profit potential, I find several demographic variables are still predictive of sustainable product availability, indicating that managers likely use simple demographic heuristics to make product stocking decisions that do not necessarily reflect actual sustainable product preferences. In the third essay, I summarize the literature on how consumers respond to products with sustainability claims. I survey first the direct effect of sustainability claims on consumer demand. I next discuss research regarding the indirect effect of sustainability claims as informative signals, and lastly I review extant literature on the heterogeneity in consumer response. Together, these essays highlight drivers of both consumer and firm behavior regarding sustainable products.