Ethical differentiation and market behavior: An experimental approach
AbstractDoes 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 InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 779.
Date of creation: Oct 2004
Date of revision: May 2006
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Web page: http://www.econ.upf.edu/
Fair trade; ethical premia; price competition; contextual effects; Leex;
Other versions of this item:
- Rode, Julian & Hogarth, Robin M. & Le Menestrel, Marc, 2008. "Ethical differentiation and market behavior: An experimental approach," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 265-280, May.
- Julian Rode & Robin M. Hogarth & Marc Le Menestrel, 2005. "Ethical differentiation and market behavior: An experimental approach," Working Papers 112, Barcelona Graduate School of Economics.
- A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-CBE-2004-12-12 (Cognitive & Behavioural Economics)
- NEP-EXP-2004-12-12 (Experimental Economics)
- NEP-MIC-2004-12-12 (Microeconomics)
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