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Market Effects of Changes in Consumers' Social Responsibility

Author

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  • Aurora García-Gallego
  • Nikolaos Georgantzís

Abstract

"In a duopoly model of vertical differentiation, we study market equilibrium and the resulting social welfare following an increase in the consumer's willingness to pay (WTP) for products sold by socially responsible manufacturers. Different types of such changes emerge depending on their effects on consumer heterogeneity. We show that, in most cases, increases in the consumers' social consciousness yield higher profits to socially responsible firms and may lead to higher levels of social welfare, provided that the market structure is left unchanged. However, when an increase in the consumer's social consciousness changes the market structure, welfare may fall, while the duopolists' profits rise. The resulting tension between private and social interest calls for a cautious attitude toward information campaigns aimed at increasing the consumer's social consciousness." Copyright (c) 2009, The Author(s) Journal Compilation (c) 2009 Wiley Periodicals, Inc..

Suggested Citation

  • Aurora García-Gallego & Nikolaos Georgantzís, 2009. "Market Effects of Changes in Consumers' Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 235-262, March.
  • Handle: RePEc:bla:jemstr:v:18:y:2009:i:1:p:235-262
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lambertini, Luca & Tampieri, Alessandro, 2015. "Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly," Economic Modelling, Elsevier, vol. 50(C), pages 40-48.
    2. L. Lambertini & A. Palestini & A. Tampieri, 2014. "CSR in an Asymmetric Duopoly with Environmental Externalities," Working Papers wp959, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Luca Lambertini & Giuseppe Pignataro & Alessandro Tampieri, 2014. "Green Consumers, Greenwashing and the Misperception of Environmental Quality," CREA Discussion Paper Series 14-21, Center for Research in Economic Analysis, University of Luxembourg.
    4. van't Veld, Klaas & Kotchen, Matthew J., 2011. "Green clubs," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 309-322.
    5. Jesse Matheson, 2011. "Prices and social behavior: A study of adult smoking in Canadian Aboriginal communities," Discussion Papers in Economics 11/50, Department of Economics, University of Leicester, revised Dec 2012.
    6. Doni, Nicola & Ricchiuti, Giorgio, 2013. "Market equilibrium in the presence of green consumers and responsible firms: A comparative statics analysis," Resource and Energy Economics, Elsevier, vol. 35(3), pages 380-395.
    7. Nelson Sá, 2015. "Market concentration and persuasive advertising: a theoretical approach," Journal of Economics, Springer, vol. 114(2), pages 127-151, March.
    8. Becchetti, Leonardo & Palestini, Arsen & Solferino, Nazaria & Elisabetta Tessitore, M., 2014. "The socially responsible choice in a duopolistic market: A dynamic model of “ethical product” differentiation," Economic Modelling, Elsevier, vol. 43(C), pages 114-123.
    9. Kaufman, Noah, 2014. "Overcoming the barriers to the market performance of green consumer goods," Resource and Energy Economics, Elsevier, vol. 36(2), pages 487-507.
    10. Vasileiou, Efi & Georgantzís, Nikolaos, 2015. "An experiment on energy-saving competition with socially responsible consumers: Opening the black box," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 1-10.
    11. Gil-Moltó, Maria José & Varvarigos, Dimitrios, 2013. "Emission taxes and the adoption of cleaner technologies: The case of environmentally conscious consumers," Resource and Energy Economics, Elsevier, vol. 35(4), pages 486-504.
    12. A. Mantovani & C. Vergari, 2013. "Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?," Working Papers wp906, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Nollet, Joscha & Filis, George & Mitrokostas, Evangelos, 2016. "Corporate social responsibility and financial performance: A non-linear and disaggregated approach," Economic Modelling, Elsevier, vol. 52(PB), pages 400-407.
    14. L. Lambertini & A. Tampieri, 2011. "Corporate Social Responsibility and Firms Ability to Collude," Working Papers wp778, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. S. Duvaleix-Tréguer & A. Hammoudi & L. Rouached & L.G. Soler, 2012. "Firms' responses to nutritional policies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(5), pages 843-877, December.
    16. L. Lambertini & A. Tampieri, 2012. "On the Emergence of Overcompliance with Endogenous Environmental Standards and Patronising Consumers," Working Papers wp847, Dipartimento Scienze Economiche, Universita' di Bologna.
    17. Andreea-Daniela, GANGONE & Mihaela, ASANDEI, 2013. "The Map Of Sustainable European Retail," Management Strategies Journal, Constantin Brancoveanu University, vol. 22(Special), pages 427-435.
    18. Fabien Prieur & Benteng Zou, 2017. "On the impact of indirect competition for political influence on environmental policy," CREA Discussion Paper Series 17-16, Center for Research in Economic Analysis, University of Luxembourg.
    19. repec:kap:regeco:v:52:y:2017:i:3:d:10.1007_s11149-017-9339-5 is not listed on IDEAS
    20. Luca Lambertini & Giuseppe Pignataro & Alessandro Tampieri, 2015. "The effect of Environmental Quality Misperception on Investments and Regulation," CREA Discussion Paper Series 15-01, Center for Research in Economic Analysis, University of Luxembourg.
    21. Evangelos Mitrokostas & Emmanuel Petrakis, 2008. "Private CSR Activities in Oligopolistic Markets: Is There Any Room for Regulation?," Working Papers 0816, University of Crete, Department of Economics.

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