Does Competition Destroy Ethical Behavior?
AbstractExplanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Using the examples of child labor, corruption, excessive' executive pay, corporate earnings manipulation, and commercial activities by universities, this paper clarifies the role of competition in promoting censured conduct. When unethical behavior cuts costs, competition drives down prices and entrepreneurs' incomes, and thereby reduces their willingness to pay for ethical conduct. Nonetheless, I suggest that competition might be good for ethical behavior in the long run, because it promotes growth and raises incomes. Higher incomes raise the willingness to pay for ethical behavior, but may also change what people believe to be ethical for the better.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10269.
Date of creation: Feb 2004
Date of revision:
Publication status: published as Shleifer, Andrei. "Does Competition Destroy Ethical Behavior?," American Economic Review, 2004, v94(2,May), 414-418.
Note: CF IO LS LE
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Other versions of this item:
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-01 (All new papers)
- NEP-COM-2004-02-01 (Industrial Competition)
- NEP-HPE-2004-02-01 (History & Philosophy of Economics)
- NEP-LAM-2004-02-01 (Central & South America)
- NEP-MIC-2004-02-01 (Microeconomics)
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- Bebchuk, Lucian Arye & Fried, Jesse, 2003.
"Executive Compensation as an Agency Problem,"
CEPR Discussion Papers
3961, C.E.P.R. Discussion Papers.
- Daniel Bergstresser & Thomas Philippon, 2003.
"CEO incentives and earnings management,"
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- Bebchuk, Lucian A. & Fried, Jesse M., 2003. "Executive Compensation as an Agency Problem," Berkeley Olin Program in Law & Economics, Working Paper Series qt81q3136r, Berkeley Olin Program in Law & Economics.
- Marianne Bertrand & Sendhil Mullainathan, 2001. "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 901-932, August.
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