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To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets

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  • Jean-Robert Tyran

    ()

  • Dirk Engelmann

    ()

Abstract

We experimentally investigate how firms and consumers react to a sudden cost increase in a competitive retail market. We compare two conditions which exclusively differ with respect to how difficult it is to organize and enforce boycotts. We find that cost increases translate into sudden price increases, and that these frequently trigger consumer boycotts. However, consumer boycotts are un-successful in holding down market prices even if collective action problems are completely eliminated. While consumer boycotts do not increase consumer rent, they reduce firm profits and market efficiency. Consumer boycotts apparently serve to punish firms for seemingly unfair price increases.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/dp2002/dp0213tyran_ganz.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2002 with number 2002-13.

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Length: 35 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:usg:dp2002:2002-13

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Keywords: Posted-offer markets; consumer boycotts; collective action;

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References

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  1. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  2. Ted Bergstrom, 2001. "Free Labor for Costly Journals?," Microeconomics 0106002, EconWPA.
  3. repec:fth:calaec:16-01 is not listed on IDEAS
  4. Franciosi, Robert, et al, 1995. "Fairness: Effect on Temporary and Equilibrium Prices in Posted-Offer Markets," Economic Journal, Royal Economic Society, vol. 105(431), pages 938-50, July.
  5. Kachelmeier, Steven J. & Limberg, Stephen T. & Schadewald, Michael S., 1991. "Fairness in markets: A laboratory investigation," Journal of Economic Psychology, Elsevier, vol. 12(3), pages 447-464, September.
  6. Sen, Sankar & Gurhan-Canli, Zeynep & Morwitz, Vicki, 2001. " Withholding Consumption: A Social Dilemma Perspective on Consumer Boycotts," Journal of Consumer Research, University of Chicago Press, vol. 28(3), pages 399-417, December.
  7. Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer, vol. 16(3), pages 529-544.
  8. Miller, Kenneth E & Sturdivant, Frederick D, 1977. " Consumer Responses to Socially Questionable Corporate Behavior: An Empirical Test," Journal of Consumer Research, University of Chicago Press, vol. 4(1), pages 1-7, June.
  9. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
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Cited by:
  1. Bruno S. Frey & Matthias Benz & Alois Stutzer, 2003. "Introducing Procedural Utility: Not only What, but also How Matters," CREMA Working Paper Series 2003-02, Center for Research in Economics, Management and the Arts (CREMA).
  2. Konrad, Kai A. & Morath, Florian & Müller, Wieland, 2010. "Taxation and market power," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-07, Social Science Research Center Berlin (WZB).
  3. Ana I. Balsa & Michael T. French & Tracy L. Regan, 2013. "Relative Deprivation and Risky Behaviors," Documentos de Trabajo/Working Papers 1304, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
  4. Georgy Egorov & Bård Harstad, 2013. "Private Politics and Public Regulation," NBER Working Papers 19737, National Bureau of Economic Research, Inc.
  5. Lisa Bruttel, 2014. "Buyer power in large buyer groups?," TWI Research Paper Series 92, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  6. Xiao, Erte & Houser, Daniel, 2009. "Avoiding the sharp tongue: Anticipated written messages promote fair economic exchange," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 393-404, June.
  7. Yuksel, Ulku & Mryteza, Victoria, 2009. "An evaluation of strategic responses to consumer boycotts," Journal of Business Research, Elsevier, vol. 62(2), pages 248-259, February.
  8. Hoffmann, Stefan & Müller, Stefan, 2009. "Consumer boycotts due to factory relocation," Journal of Business Research, Elsevier, vol. 62(2), pages 239-247, February.
  9. Rafael Di Tella & Juan Dubra, 2009. "Anger and Regulation," NBER Working Papers 15201, National Bureau of Economic Research, Inc.
  10. Alan Hamlin & Colin Jennings, 2009. "Expressive Political Behaviour: Foundations, Scope and Implications," Working Papers 0918, University of Strathclyde Business School, Department of Economics.

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