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Firms' ethics, consumer boycotts, and signalling

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  • Glazer, Amihai
  • Kanniainen, Vesa
  • Poutvaara, Panu

Abstract

This paper develops a theory of consumer boycotts. To affect a firm's ethical behavior, moral consumers refuse to buy from an unethical firm. Consumers who do not care about ethical behavior may join the boycott to (falsely) signal that they do care, increasing the disciplinary power of consumer boycotts. In the firm's choice between ethical and unethical behavior, the optimality of mixed and pure strategies depends on the cost of producing ethically. In particular, when the cost is (relatively) low, ethical behavior arises from a prisoners' dilemma as the firm's optimal strategy.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 26 (2010)
Issue (Month): 3 (September)
Pages: 340-350

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Handle: RePEc:eee:poleco:v:26:y:2010:i:3:p:340-350

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Web page: http://www.elsevier.com/locate/inca/505544

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Keywords: Firm' s ethical code Consumer morality Boycotts;

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References

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  1. Andrea C. Morales, 2005. "Giving Firms an "E" for Effort: Consumer Responses to High-Effort Firms," Journal of Consumer Research, University of Chicago Press, vol. 31(4), pages 806-812, 03.
  2. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  3. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  4. Guth, W., 1993. "A Simple Justification of Quantity Competition and the Cournot-Oligopoly Solution," Discussion Paper 1993-5, Tilburg University, Center for Economic Research.
  5. Robert Innes, 2006. "A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition," Economic Journal, Royal Economic Society, vol. 116(511), pages 355-381, 04.
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Cited by:
  1. Fabrice Etilé & Sabrina Teyssier, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 94(2), pages 221-259.

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