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Corporate and Consumer Social Responsibilities: Label Regulations in the Lab

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  • Etile, Fabrice
  • Teyssier, Sabrina

Abstract

Although consumer attitudes toward corporate social responsibility are positive, socially responsible (SR) products are far from gaining significant market shares. Information asymmetries have been identified as one of the factor contributing to this attitude-behaviour gap, because social responsibility is a credence attribute. Signalling may remedy this market failure. We use an experimental posted offer market to investigate the impact of various regulatory requirements for labels on sellers’ choice to supply SR products and to signal it, and on buyers’ choice of ethical quality. Three treatments are tested: label certification by a third-party, “cheap-talk signalling” with random monitoring and with or without reputations. Individual social preferences are elicited prior to the game, and their distribution generates a positive supply of and demand for social responsibility. When there is third-party certification or cheap-talk signalling with random monitoring and reputations, a separating equilibrium emerges, whereby labelled and non-labelled goods are exchanged at different prices. However, efficiency gains are significant only for third-party certification. Cheap-talk signalling with random monitoring but without reputations does not yield efficiency gains. Moreover, it generates a “halo” effect, whereby buyers are misguided by sellers’ claims about product quality. Finally, individual social preferences have a significant effect on players’ decisions. Only third-party certification can increase companies’ social responsibility and can allow consumers to express their social preferences through consumption.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 120399.

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Date of creation: 2011
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Handle: RePEc:ags:eaae11:120399

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Related research

Keywords: labels; social responsibility; social preferences; separating equilibrium; market game; Consumer/Household Economics; Food Consumption/Nutrition/Food Safety; Marketing; C92; D82; L15; M14;

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  1. Julian Rode & Robin M. Hogarth & Marc Le Menestrel, 2005. "Ethical differentiation and market behavior: An experimental approach," Working Papers 112, Barcelona Graduate School of Economics.
  2. Krause, M. & Kroger, S. & Potters, J.J.M., 2004. "Insights from experimental economics for market regulation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-145952, Tilburg University.
  3. Cason, Timothy N. & Gangadharan, Lata, 2002. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 113-134, January.
  4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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