NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Advertising, Reputation, and Environmental Stewardship: Evidence from the BP Oil Spill

Lint Barrage, Eric Chyn, Justine Hastings

NBER Working Paper No. 19838
Issued in January 2014
NBER Program(s):   EEE   IO   PE

This paper explores whether and how environmental stewardship can be provided by private markets through green advertising. We examine the period surrounding the BP oil spill and estimate how BP's pre-spill investment in "green advertising" affected the spill's impact on retail prices and demand at BP gasoline stations. We use station-level prices and sales from a large sample of U.S. retail gasoline stations, and market-level advertising expenditures during BP's 2000-2008 "Beyond Petroleum" advertising campaign. We find evidence consistent with consumer punishment of BP in the months following the spill; overall BP margins declined significantly by 4.2 cents per gallon, and volumes declined by 3.6 percent during the spill. We examine how pre-spill environmental advertising affected the spill's impact on margins and sales, testing whether expenditures on green reputation act as a commitment to green production or as insurance against environmental damage. We find evidence in support of the latter: pre-spill exposure to BP advertising significantly softened the impact of the spill on BP retail margins, and abated losses to station share from stations switching to alternative gasoline brands.

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A data appendix is available at http://www.nber.org/data-appendix/w19838

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19838

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