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To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets

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  • Jean-Robert Tyran
  • Dirk Engelmann

Abstract

We investigate experimentally how firms and consumers react to a sudden cost increase in a competitive retail market. We compare two conditions that exclusively differ with respect to how difficult it is to organize and enforce boycotts. We find that cost increases translate into sudden price increases, and that consumer boycotts are frequent in response. However, consumer boycotts are unsuccessful in holding down market prices even if collective action problems are completely eliminated. While consumer boycotts do not increase consumer rent, they reduce market efficiency. Consumer boycotts apparently serve to punish firms for seemingly unfair price increases. Copyright (c) The London School of Economics and Political Science 2005.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 72 (2005)
Issue (Month): 285 (02)
Pages: 1-16

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Handle: RePEc:bla:econom:v:72:y:2005:i:285:p:1-16

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  1. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  2. Ted Bergstrom, 2001. "Free Labor for Costly Journals?," Microeconomics 0106002, EconWPA.
  3. Kachelmeier, Steven J. & Limberg, Stephen T. & Schadewald, Michael S., 1991. "Fairness in markets: A laboratory investigation," Journal of Economic Psychology, Elsevier, vol. 12(3), pages 447-464, September.
  4. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
  5. Sen, Sankar & Gurhan-Canli, Zeynep & Morwitz, Vicki, 2001. " Withholding Consumption: A Social Dilemma Perspective on Consumer Boycotts," Journal of Consumer Research, University of Chicago Press, vol. 28(3), pages 399-417, December.
  6. Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer, vol. 16(3), pages 529-544.
  7. repec:fth:calaec:16-01 is not listed on IDEAS
  8. Franciosi, Robert, et al, 1995. "Fairness: Effect on Temporary and Equilibrium Prices in Posted-Offer Markets," Economic Journal, Royal Economic Society, vol. 105(431), pages 938-50, July.
  9. Miller, Kenneth E & Sturdivant, Frederick D, 1977. " Consumer Responses to Socially Questionable Corporate Behavior: An Empirical Test," Journal of Consumer Research, University of Chicago Press, vol. 4(1), pages 1-7, June.
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