Will I Pay for Your Pleasure? Consumers’ Perceptions of Negative Externalities and Responses to Pigovian Taxes

Pigovian taxes are time-honored responses to negative externalities in the commercial world: firms that pollute must pay the costs of the damage they do to their community. Such localization of costs to those who create them seems rational and fair. But when Pigovian taxes are presented to consumers, how do they respond? We show that to the extent consumers perceive that others’ behavior creates economic costs for them, they better understand and evaluate related communications and are more accepting of Pigovian interventions. Perceived negative externalities explain responses to Pigovian taxes better than other demographic and psychographic constructs often assumed to drive attitudes in this area. Finally, we show that responses to Pigovian interventions are driven by perceived fairness. This article offers an important starting place for marketers hoping to effectively communicate about Pigovian taxes, and for sponsoring policy makers who struggle to gain support among wide segments of the population.