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Ethical differentiation and market behavior: An experimental approach

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Abstract

Does ethical differentiation of products affect market behavior? We examined this issue in triopolistic experimental markets where producers set prices. One producer’s costs were higher than the others. In two treatments, the additional costs were attributed to compliance with ethical guidelines. In the third, no justification was provided. Many participants playing the role of consumers reduced their experimental gains by purchasing the ethically differentiated product at a higher price – whether or not they knew the amount of extra cost. Individual differences were important (students of business/economics paid smaller premia than others). Finally, we speculate about the observed “demand function” for ethics and emphasize the use of experimental methodology to complement empirical studies designed to assess the potential market for ethically differentiated products.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 779.

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Date of creation: Oct 2004
Date of revision: May 2006
Handle: RePEc:upf:upfgen:779

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Web page: http://www.econ.upf.edu/

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Keywords: Fair trade; ethical premia; price competition; contextual effects; Leex;

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Citations

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Cited by:
  1. Rode, Julian, 2007. "Truth and Trust in Communication: An Experimental Study of Behavior under Asymmetric Information," Ratio Working Papers 111, The Ratio Institute.
  2. Basu, Arnab K. & Hicks, Robert L., 2008. "Label Performance and the Willingness to Pay for Fair Trade Coffee: A Cross-National Perspective," Discussion Papers 44336, University of Bonn, Center for Development Research (ZEF).
  3. Thuriane Mahé, 2010. "Are Stated Preferences Confirmed by Purchasing Behaviours? The Case of Fair Trade-Certified Bananas in Switzerland," Journal of Business Ethics, Springer, vol. 92(2), pages 301-315, April.
  4. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 94(02), pages 221-259, June.
  5. Jana Friedrichsen & Dirk Engelmann, 2013. "Who Cares for Social Image? Interactions between Intrinsic Motivation and Social Image Concerns," CESifo Working Paper Series 4514, CESifo Group Munich.
  6. MacKerron, George J. & Egerton, Catrin & Gaskell, Christopher & Parpia, Aimie & Mourato, Susana, 2009. "Willingness to pay for carbon offset certification and co-benefits among (high-)flying young adults in the UK," Energy Policy, Elsevier, vol. 37(4), pages 1372-1381, April.
  7. Veronika Andorfer & Ulf Liebe, 2012. "Research on Fair Trade Consumption—A Review," Journal of Business Ethics, Springer, vol. 106(4), pages 415-435, April.
  8. repec:hal:wpaper:halshs-00736551 is not listed on IDEAS
  9. Etile, Fabrice & Teyssier, Sabrina, 2011. "Corporate and Consumer Social Responsibilities: Label Regulations in the Lab," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 120399, European Association of Agricultural Economists.
  10. Freitas, Luiz & Wagner, Jeffrey, 2009. "The uncertain moral context of price changes," Ecological Economics, Elsevier, vol. 68(4), pages 1100-1105, February.
  11. Fabrice Etilé & Sabrina Teyssier, 2012. "Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands," PSE Working Papers halshs-00736551, HAL.
  12. Vincze, János & Koltay, Gábor, 2009. "Fogyasztói döntések a viselkedési közgazdaságtan szemszögéből
    [Consumer decisions from the angle of behavioural economics]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 495-525.
  13. Lim, Hea-Jin & Yoo, Seung-Hoon, 2014. "Train travel passengers' willingness to pay to offset their CO2 emissions in Korea," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 526-531.
  14. Cox, Caleb A., 2013. "Inequity aversion and advantage seeking with asymmetric competition," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 121-136.

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