Environmental impact, quality, and price: Consumer trade-offs and the development of environmentally friendly technologies

The paper examines the effect of heterogeneous consumer trade-offs – between environmental performance, quality of service characteristics, and price – on the generation and diffusion of environmentally benign technology paradigms. We find that the direction, timing, and environmental impact of new paradigms is shaped by the distribution of consumer trade-offs. Of key importance are the initial distributions of consumer preferences, and how those distributions evolve over time. This has serious implications on environmental pollution, and for policy makers seeking to influence the ‘greening’ of consumer demand.