Chinese urban resident willingness to pay for green housing based on double-entry mental accounting theory

Abstract

Promotion and use of green housing is an important way to reduce building energy consumption, achieve emission reduction targets, and improve residential environments. In the process of consumer choice of green housing, residents’ psychological behaviors, product characteristics of green housing, and option framing methods all have an important influence on the willingness to pay (WTP). This paper analyzed WTP for green housing using two sets of experiments from the perspectives of consumer behavior theory and behavioral economics. Taking four cities with high levels of green housing development in China as examples to conduct large-scale empirical studies, we explored the impact of double-entry mental accounting on resident WTP for green housing. The results show that (1) each dimension of perceived benefits is significantly positively correlated with WTP, each dimension of perceived sacrifices is significantly negatively correlated with WTP, and the sensitivity coefficient of functional risk and policy risk is relatively large, i.e., WTP is more sensitive to functional risk and policy risk. (2) Double-entry mental accounting has a significant moderating effect between residents perceived value and WTP. The stronger the positive correlation between perceived benefits and the WTP when the larger pain of payment (large coefficient of pleasure attenuation or small coefficient of pain buffering) rather than smaller pain of payment meaning greater impact of perceived benefits on WTP. Negative correlation between perceived sacrifices and WTP is weak when residents have small coefficient of pleasure attenuation, indicating that the residents have higher psychological enjoyment when making consumption decisions. Hence, WTP is still high even in situations with higher perceived sacrifice. However, the coefficient of pain buffering has no significant moderating effect on the relationship between perceived sacrifices and WTP. (3) In the context of different framing effects, resident values mediate between perceived benefits and WTP, and the framing effect can influence resident WTP. Resident WTP for green housing is higher in the context of subtractive framing compared with additive framing. Various proposals are provided at government and developer level based on the study outcomes.