Working Paper: NBER ID: w19838
Authors: Lint Barrage; Eric Chyn; Justine Hastings
Abstract: This paper explores whether private markets can incentivize environmental stewardship. We examine the consumer response to the 2010 BP oil spill and test how BP's investment in the 2000-2008 “Beyond Petroleum” green advertising campaign affected this response. We find evidence consistent with consumer punishment: BP station margins and volumes declined by 2.9 cents per gallon and 4.2 percent, respectively, in the month after the spill. However, pre-spill advertising significantly dampened the price response, and may have reduced brand switching by BP stations. These results indicate that firms may have incentives to engage in green advertising without investments in environmental stewardship.
Keywords: Advertising; Environmental Stewardship; BP Oil Spill; Consumer Behavior
JEL Codes: H0; H23; L0; M3; M38; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| BP stations (E58) | decline in prices (E31) |
| BP stations (E58) | decline in sales (L81) |
| pre-spill advertising (M38) | reduced negative price impact of the spill (Q31) |
| advertising (M37) | consumer perceptions of the spill (H12) |
| advertising (M37) | reputational insurance (G52) |
| low pre-spill advertising (M38) | greater long-term losses in market share post-spill (F64) |