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Environmentalists Offer a Big Push for New Green Products: Evidence from Hybrid Vehicle Registrations

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Document pages: 31 pages

Abstract: Corporations are constantly introducing new products for sale. Some new products, such as hybrid vehicles, are greener than incumbent products. Due to composition effects, certain environmental externalities could be mitigated if there were guinea pigs willing to commit to purchase new green products. In the presence of fixed costs of production, firms will be more likely to produce such products if they anticipate that there is demand. This paper examines the role of environmentalists as "guinea pigs " who purchase unproven new products that are likely to offer social environmental benefits. I focus on the diffusion of registered Hybrid vehicles across Los Angeles census tracts between 2001 and 2005.

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