Can quality signals increase the demand for sustainable technology?
In a recent publication, Professor Reichert, together with Aidan Coville (World Bank), Ann-Kristin Reitmann (University of Rennes), and Joshua Graff Zivin (University of California, San Diego), examines whether information problems concerning product quality may contribute to the low willingness to pay for solar technology. The quality difference between the low-quality and high-quality lamps used in the field experiment in Senegal is unobservable by visual inspection such that households reveal no preference for one or the other in the experimental control condition. Can quality-signaling interventions help consumers to distinguish good from bad quality products?
a) The certification and 2-year warranty increase the willingness to pay (WTP) for the high-quality lamp by 12–14%.
b) The money-back guarantee does not affect demand.
c) Surprisingly, the study finds the certification and 2-year warranty also increase WTP for the low-quality lamps—that is, quality signals appear to change perceptions about the entire product class. These product-class effects are concentrated among households that have never owned a solar lamp before. Private sellers have low incentives to invest in a warranty scheme when the generated additional demand is shared with competitors.
d) The results show that the certification and 2-year warranty yield Akerlof's classical prediction of a separation of low- and high-quality demand curves only for households which have owned a solar lamp before, i.e., experienced consumers.
See paper here:
https://www.sciencedirect.com/science/article/pii/S0304387825000653?via%3Dihub
See voxdev blog post here:
https://voxdev.org/topic/energy-environment/can-quality-signalling-boost-demand-solar-technologies
