Can Rising Eco-sensitivity Hurt Sustainability? Eco-impact of Durable Goods Innovations

We develop a dynamic two‐period model to analyze the eco-impact of durable goods innovations in a period of rising consumer eco-sensitivity. Our framework decomposes total eco-harm into in-use and replacement-phase harm components and distinguishes functional innovations from use‐efficiency innovations. We show that rising eco-sensitivity reduces upgrades for functional and low‐efficiency innovations (this reduces replacement‐driven harm) while accelerating upgrades of high‐efficiency innovations and reducing in‐use harm. In these cases, rising eco-sensitivity also reduces total harm. But, for moderate‐efficiency innovations (replacement harm exceeds reduction in in-use harm, but the two are close), rising eco-sensitivity can perversely increase total eco-harm as firms respond by lowering prices during the less eco-sensitive period when the less efficient models are sold. We demonstrate that targeted policies—trade‐in discounts and recycling programs—mitigate this unintended effect on eco-harm and raise profit. We highlight when firms and environmental advocates will play complementary or conflicting roles in raising consumers’ eco-sensitivity. Overall, the paper demonstrates how consumer choices, firm pricing, and eco-sensitivity dynamically interact, offering actionable insights for aligning sustainability and profitability in durable goods markets.

History: Anthony Dukes served as the senior editor.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mksc.2022.0304.