Original Research

The price premium of an environmentally friendly product

Dimitri Kapelianis, Sandra Strachan
South African Journal of Business Management | Vol 27, No 4 | a813 | DOI: https://doi.org/10.4102/sajbm.v27i4.813 | © 2018 Dimitri Kapelianis, Sandra Strachan | This work is licensed under CC Attribution 4.0
Submitted: 15 October 2018 | Published: 31 December 1996

About the author(s)

Dimitri Kapelianis, Department of Business Economics, School of Economic and Business Studies, University of the Witwatersrand, South Africa
Sandra Strachan, Department of Business Economics, School of Economic and Business Studies, University of the Witwatersrand, South Africa

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Abstract

The relationship between marketing and the environment has recently received considerable attention. Much of the literature in this field deals with the premia that consumers are willing to pay for environmentally friendly products as well as the characteristics that describe these consumers. The methods used for estimating these premia are, however, methodolog1cally flawed. This article presents a model for calculating premia on the basis of part-worth utilities derived from conjoint analysis. The authors find that racial and educational differences exist in willingness to pay a premium. These differences persist even when variances in other variables (for example, income) are controlled.

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