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Ethical Differentiation and Market Behavior: An Experimental Approach

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Author Info
Julian Rode
Robin Hogarth ()
Marc Le Menestrel ()
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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File URL: http://www.econ.upf.edu/docs/papers/downloads/779.pdf
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Publisher 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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Related research
Keywords: Fair trade ethical premia price competition contextual effects Leex

Find related papers by JEL classification:
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

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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. P. De Pelsmacker & L. Driesen & G. Rayp, 2003. "Are fair trade labels good business ? Ethics and coffee buying intentions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/165, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  2. Eckel, Catherine C. & Grossman, Philip J., 1996. "Altruism in Anonymous Dictator Games," Games and Economic Behavior, Elsevier, vol. 16(2), pages 181-191, October. [Downloadable!] (restricted)
  3. Robin Hogarth, 2004. "The Challenge of Representative Design in Psychology and Economics," Economics Working Papers 751, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2005. [Downloadable!]
  4. Frank, Robert H & Gilovich, Thomas & Regan, Dennis T, 1993. "Does Studying Economics Inhibit Cooperation?," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 159-71, Spring. [Downloadable!] (restricted)
  5. Yezer, Anthony M & Goldfarb, Robert S & Poppen, Paul J, 1996. "Does Studying Economics Discourage Cooperation? Watch What We Do, Not What We Say or How We Play," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 177-86, Winter. [Downloadable!] (restricted)
  6. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June. [Downloadable!] (restricted)
  7. John A. List et al., 2004. "Examining the Role of Social Isolation on Stated Preferences," American Economic Review, American Economic Association, vol. 94(3), pages 741-752, June. [Downloadable!] (restricted)
  8. Dufwenberg, Martin & Gneezy, Uri, 2000. "Price competition and market concentration: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 7-22, January. [Downloadable!] (restricted)
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