EFFECTIVENESS OF ECO-MARKETING ON GREEN VEHICLE PURCHASE BEHAVIOR IN MAINE: A NESTED-LOGIT MODEL APPROACH

Effectiveness of eco-marketing on Green vehicle purchase behavior in Maine: A nested-logit model approach

By Shyamani Dilantha Siriwardena

Thesis Advisors: Dr. Mario F. Teisl & Dr. Gary L. Hunt

A Lay Abstract of the Thesis Presented

in Partial Fulfillment of the Requirements for the

Degree of Master of Science

(in Resource Economics and Policy)

August, 2010

Increased consumption of Light-duty vehicles (LDV) in the U.S has contributed to increased air pollution thorough criteria emissions and green house gas emissions. The eco-marketing campaign conducted by the School of Economics of University of Maine in collaboration with the Maine Department of Environmental Protection, the Maine Auto Dealers association, and the Natural Resource Council of Maine in 2005 attempted to encourage eco-friendly (greener) consumption habits among Maine vehicle buyers. Previous studies have found that this campaign has changed the awareness and intended behavior of consumers and the eco-composition of the market.This research focuses in understanding the impact of the campaign on actual greener purchasing behavior.  

A wide range of LDV makes/ including their substitutes is available to consumers; rational consumers make choices based on their preferences and constraints. The choice probabilities of vehicles are more likely to be influenced by the substitutes, but not by the unrelated vehicle alternatives. We model this consumer choice using a nested logit specification that represents the subsets of related vehicle make/models by nests. We used the SmartWay^SM definition of EPA to set up the ‘greener/non-greener vehicles’ nest structure for our model. For the analysis, we used a database of 46870 vehicle registration records from 2004 to 2007 that contains vehicle attributes, socio-demographics and gas price information. Results reveal that this small-scale short-term eco-marketing campaign had short-term positive effects on the choice of new greener passenger cars. Also the results indicate that greener car buyers come from highly educated communities that mostly contain people who are employed in white collar jobs. Further, age has a significant positive, but non-linear effect on the greener vehicle choice.