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Firms' ethics, consumer boycotts, and signalling

Author

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  • Glazer, Amihai
  • Kanniainen, Vesa
  • Poutvaara, Panu

Abstract

This paper develops a theory of consumer boycotts. To affect a firm's ethical behavior, moral consumers refuse to buy from an unethical firm. Consumers who do not care about ethical behavior may join the boycott to (falsely) signal that they do care, increasing the disciplinary power of consumer boycotts. In the firm's choice between ethical and unethical behavior, the optimality of mixed and pure strategies depends on the cost of producing ethically. In particular, when the cost is (relatively) low, ethical behavior arises from a prisoners' dilemma as the firm's optimal strategy.

Suggested Citation

  • Glazer, Amihai & Kanniainen, Vesa & Poutvaara, Panu, 2010. "Firms' ethics, consumer boycotts, and signalling," European Journal of Political Economy, Elsevier, vol. 26(3), pages 340-350, September.
  • Handle: RePEc:eee:poleco:v:26:y:2010:i:3:p:340-350
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    References listed on IDEAS

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    4. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    5. Berentsen, Aleksander & Bruegger, Esther & Loertscher, Simon, 2008. "On cheating, doping and whistleblowing," European Journal of Political Economy, Elsevier, vol. 24(2), pages 415-436, June.
    6. Baron, David P., 2002. "Private Politics and Private Policy: A Theory of Boycotts," Research Papers 1766, Stanford University, Graduate School of Business.
    7. Ken Binmore, 1998. "Game Theory and the Social Contract - Vol. 2: Just Playing," MIT Press Books, The MIT Press, edition 1, volume 2, number 0262024446, January.
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    Cited by:

    1. Johan Graafland & Hugo Smid, 2015. "Competition and Institutional Drivers of Corporate Social Performance," De Economist, Springer, vol. 163(3), pages 303-322, September.
    2. Leonardo Becchetti & Nazaria Solferino & M. Tessitore, 2015. "How to safeguard world heritage sites? A theoretical model of “cultural responsibility”," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(3), pages 223-248, September.
    3. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 94(02), pages 221-259, June.
    4. Hans Pitlik, 2016. "Who Disapproves of TTIP? Multiple Distrust in Companies and Political Institutions," WIFO Working Papers 513, WIFO.
    5. Jan Schmitz & Jan Schrader, 2015. "Corporate Social Responsibility: A Microeconomic Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 27-45, February.
    6. Suzanne C. Makarem & Haeran Jae, 2016. "Consumer Boycott Behavior: An Exploratory Analysis of Twitter Feeds," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(1), pages 193-223, March.
    7. Vesa Kanniainen, 2016. "Making the World a Better Place: Consumers' Group Identity in the Markets with Competition and Two-sided Opportunism," CESifo Working Paper Series 5842, CESifo Group Munich.

    More about this item

    Keywords

    Firm' s ethical code Consumer morality Boycotts;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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