Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands
AbstractFor most consumers, Corporate Social Responsibility is a credence attribute of products, which can be signaled either through a label certified by a third party, or via unsubstantiated claims used as part of a brand-building strategy. These claims may, in theory, be regulated by reputation mechanisms and the awareness of NGOs and activists. We use an experimental posted-offer market with sellers and buyers to compare the impact of these signalling strategies on market efficiency. Both third-party certification and the possibility of CSRrelated brand building give rise to a separating equilibrium. However, only third-party certification clearly produces efficiency gains, by increasing CSR investments. In markets where reputation matters little, unsubstantiated claims can generate a 'halo' effect on consumers, whereby the latter are nudged into paying more for the same level of CSR investments by firms.
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Corporate social responsibility ; Third-party certification ; Brand building ; Market experiment ; Halo effect;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-EXP-2012-10-13 (Experimental Economics)
- NEP-MKT-2012-10-13 (Marketing)
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