Ecolabeled paper towels: Consumer valuation and expenditure analysis

Ecolabeled paper towels are manufactured using post-consumer recycled material and sold in markets using a recycle logo. Environmentally conscious consumers purchase these paper towels and thereby contribute to improving environmental quality. In this paper, we estimate the implicit value placed by consumers on ecolabeled paper towels using a hedonic price function and conduct an expenditure analysis using Heckman's selection model. Using the data set from the Internet-based grocery stores called as Peapod we find that some consumers recognize ecolabels on paper towels and place a substantial, positive price premium on them. The expenditure analysis indicates that for the preferred functional form, the demand for ecolabeled paper towels is inelastic for environmentally conscious consumers. The simulated results from the selection model indicate that a small subsidy for ecolabeled paper towels will not substantially change consumers' purchase decisions.