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Does Competition Destroy Ethical Behavior?

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  • Andrei Shleifer

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    • Handle: RePEc:aea:aecrev:v:94:y:2004:i:2:p:414-418
    DOI: 10.1257/0002828041301498
    Note: DOI: 10.1257/0002828041301498
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    References listed on IDEAS

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    1. Bergstresser, Daniel & Philippon, Thomas, 2006. "CEO incentives and earnings management," Journal of Financial Economics, Elsevier, vol. 80(3), pages 511-529, June.
    2. repec:cdl:oplwec:qt81q3136r is not listed on IDEAS
    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.
    4. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are CEOs Rewarded for Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 901-932.
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    More about this item

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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