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Does Competition Destroy Ethical Behavior?

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Author Info
Andrei Shleifer

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Abstract

Explanations 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10269.

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Date of creation: Feb 2004
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Handle: RePEc:nbr:nberwo:10269

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Find related papers by JEL classification:
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs

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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.:
  1. 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. [Downloadable!] (restricted)
  2. Lucian Arye Bebchuk & Jesse M. Fried, 2003. "Executive Compensation as an Agency Problem," NBER Working Papers 9813, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Lucian Arye Bebchuk & Jesse M. Fried, 2003. "Executive Compensation as an Agency Problem," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 71-92, Summer. [Downloadable!] (restricted)
  4. Andrei Shleifer & Robert W. Vishny, 1993. "Corruption," NBER Working Papers 4372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Bebchuk, Lucian Arye & Fried, Jesse, 2003. "Executive Compensation as an Agency Problem," CEPR Discussion Papers 3961, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Lucian Bebchuk & Jesse Fried, 2003. "Executive Compensation as an Agency Problem," Berkeley Olin Program in Law & Economics, Working Paper Series 1106, Berkeley Olin Program in Law & Economics. [Downloadable!]
  7. Daniel Bergstresser & Thomas Philippon, 2003. "CEO incentives and earnings management," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 304-335.
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(explanations, 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.)

  1. Armstrong, Mark & Chen, Yongmin, 2007. "Inattentive Consumers and Product Quality," MPRA Paper 4797, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Mason, Simon A. & Muller, Adrian, 2006. "Analyzing Economic Market Interactions as Conflicts: New Concepts to Assess Market-Based Policy Instruments," Working Papers in Economics 212, Göteborg University, Department of Economics. [Downloadable!]
    Other versions:
  3. Vendrik,Maarten C.M. & Schwieren,Christiane, 2005. "Identification, screening and stereotyping in labor market discrimination," Research Memoranda 013, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  4. Lai, Richard, 2005. "Does Competition Kill Ties?," MPRA Paper 4759, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. Halla, Martin & Schneider, Friedrich, 2008. "Taxes and Benefits: Two Distinct Options to Cheat on the State?," IZA Discussion Papers 3536, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. vranceanu, radu, 2007. "The moral layer of contemporary economics: A virtue-ethics perspective," ESSEC Working Papers DR 07006, ESSEC Research Center, ESSEC Business School. [Downloadable!]
  7. Östling, Robert, 2006. "Economic Influences on Moral Values," Working Paper Series in Economics and Finance 635, Stockholm School of Economics, revised 17 Oct 2007.
  8. Vranceanu, Radu, 2005. "The Ethical Dimension of Economic Choices," ESSEC Working Papers DR 05001, ESSEC Research Center, ESSEC Business School. [Downloadable!]
  9. Liliane Karlinger, 2008. "The Underground Economy in the Late 1990s: Evading Taxes, or Evading Competition?," Vienna Economics Papers 0802, University of Vienna, Department of Economics. [Downloadable!]
    Other versions:
  10. Säve-Söderbergh, Jenny, 2005. "Who is Willing to Let Ethics Guide His Economic Decision-Making? Evidence from Individual Investments in Ethical Funds," Working Paper Series 7/2005, Swedish Institute for Social Research. [Downloadable!]
  11. Schwieren, Christiane & Weichselbaumer, Doris, 2008. "Does Competition Enhance Performance or Cheating? A Laboratory Experiment," IZA Discussion Papers 3275, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," NBER Working Papers 12365, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Patricia Crifo & Jean-Louis Rullière, 2004. "Incentives and Anonymity Principle: Crowding Out Toward Users," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  14. Hsiang-Lin Chih & Chung-Hua Shen & Feng-Ching Kang, 2008. "Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence," Journal of Business Ethics, Springer, vol. 79(1), pages 179-198, April. [Downloadable!] (restricted)
  15. Amihai Glazer & Vesa Kanniainen & Panu Poutvaara, 2008. "Informational Benefits of International Environmental Agreements," Working Papers 070818, University of California-Irvine, Department of Economics. [Downloadable!]
    Other versions:
  16. Liliane Karlinger, 2008. "Globalizing Tax Evasion: How Competition Affects the Size of the Underground Economy," Vienna Economics Papers 0801, University of Vienna, Department of Economics. [Downloadable!]
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