Firms’ Ethics, Consumer Boycotts, and Signalling

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Firms’ Ethics, Consumer Boycotts, and Signalling

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Amihai Glazer ()
Vesa Kanniainen ()
Panu Poutvaara ()

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Abstract

This paper develops a theory of consumer boycotts. Some consumers care not only about the products they buy but also about whether the firm behaves ethically. Other consumers do not care about the behavior of the firm but yet may like to give the impression of being ethical consumers. Consequently, 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. In the firm’s choice between ethical and unethical behavior, the optimality of mixed and pure strategies depends on the cost of behaving 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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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2323.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2323

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Paper
- Glazer, Amihai & Kanniainen, Vesa & Poutvaara, Panu, 2008. "Firms’ Ethics, Consumer Boycotts, and Signalling," IZA Discussion Papers 3498, Institute for the Study of Labor (IZA). [Downloadable!]

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Andrea C. Morales, 2005. "Giving Firms an "E" for Effort: Consumer Responses to High-Effort Firms," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 31(4), pages 806-812, 03. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)
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. [Downloadable!] (restricted)

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This page was last updated on 2009-11-3.

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