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Temporary boycotts as self-fulfilling disruptions of markets

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  • Peck, James

Abstract

This paper demonstrates how equilibrium involving anticipated boycotts and actual boycotts can occur, even though consumers are negligible and only care about the price they pay and the timing of purchase. The model is a two-period durable goods monopoly game with demand uncertainty. First, a “non-boycott” equilibrium is characterized. Under regularity assumptions ruling out multiplicative uncertainty, there are additional equilibria in which the firm sets a low price in period 0, based on the anticipation that consumers will boycott whenever the price exceeds a threshold. Also, the augmented game, with a publicly observed sunspot, has equilibria in which boycotts occur on the equilibrium path with positive probability.

Suggested Citation

  • Peck, James, 2017. "Temporary boycotts as self-fulfilling disruptions of markets," Journal of Economic Theory, Elsevier, vol. 169(C), pages 1-12.
    • Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:1-12
    DOI: 10.1016/j.jet.2017.01.005
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    References listed on IDEAS

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    1. Robert Innes, 2006. "A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition," Economic Journal, Royal Economic Society, vol. 116(511), pages 355-381, April.
    2. Heijnen, Pim & van der Made, Allard, 2012. "A signaling theory of consumer boycotts," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 404-418.
    3. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 599-634, September.
    4. Raymond Deneckere & James Peck, 2012. "Dynamic Competition With Random Demand and Costless Search: A Theory of Price Posting," Econometrica, Econometric Society, vol. 80(3), pages 1185-1247, May.
    5. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, March.
    6. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-851, September.
    7. Andrew John & Jill Klein, 2003. "The Boycott Puzzle: Consumer Motivations for Purchase Sacrifice," Management Science, INFORMS, vol. 49(9), pages 1196-1209, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Peck, James & Rampal, Jeevant, 2019. "Non-optimality of state by state monopoly pricing with demand uncertainty: An example," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    2. Roberto A. Weber & Sili Zhang, 2023. "What Money Can Buy: How Market Exchange Promotes Values," CESifo Working Paper Series 10809, CESifo.
    3. Zijun Luo & Yonghong Zhou, 2020. "Decomposing the effects of consumer boycotts: evidence from the anti-Japanese demonstration in China," Empirical Economics, Springer, vol. 58(6), pages 2615-2634, June.
    4. Yi Zheng, 2020. "Non-organized boycott: alliance advantage and free riding incentives in uneven wars of attrition," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 123-141, March.

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    More about this item

    Keywords

    Boycott; Sunspot; Monopoly; Demand uncertainty;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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