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Informational Benefits of International Environmental Agreements

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Author Info
Amihai Glazer () (Department of Economics, University of California-Irvine)
Vesa Kanniainen () (Department of Economics, University of Helsinki)
Panu Poutvaara () (Department of Economics, University of Helsinki)

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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 University of California-Irvine, Department of Economics in its series Working Papers with number 070818.

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Length: 16 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:irv:wpaper:070818

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Related research
Keywords: Firm's ethical code; Consumer morality; Boycotts;

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

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References listed on IDEAS
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  1. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May. [Downloadable!]
    Other versions:
  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, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
  3. CHANDERÊ, Parkash & TULKENS, Henry, 1994. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," CORE Discussion Papers 1994048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  4. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2005. "International Environmental Agreements and Strategic Voting," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(1), pages 175-195, 03. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  6. Baron, David P., 2002. "Private Politics and Private Policy: A Theory of Boycotts," Research Papers 1766, Stanford University, Graduate School of Business. [Downloadable!]
  7. 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 2009-11-22.

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