IDEAS home Printed from https://ideas.repec.org/a/kap/jrisku/v56y2018i1d10.1007_s11166-018-9276-4.html
   My bibliography  Save this article

Corporate apology for environmental damage

Author

Listed:
  • Ben Gilbert

    (Colorado School of Mines)

  • Alexander James

    (University of Alaska Anchorage)

  • Jason F. Shogren

    (University of Wyoming)

Abstract

Apologies are a powerful way to restore trust and reduce punishment costs in bilateral settings. But what do we know about public apologies for large scale man-made disasters? Herein we report on results from an experiment with apologies in a multilateral setting: a firm-caused environmental disaster. Subjects read about an oil spill scenario, and learned whether the oil firm made a full apology, a partial apology, or no apology, and whether the firm had a good, bad, or no environmental reputation. A partial apology is one that fails to accept full material responsibility for damages, such as by shifting the blame to another party. We find that full apologies and better reputation reduce the demand for punishment. However, full apologies and reputation are substitutes, with reputation being significantly more important. Additionally, apologies do not reduce the demand for compensation and may increase it if the firm is clearly a bad actor, or if admission of guilt is the only information subjects have. Our results help explain corporate social responsibility investments and greenwashing, and why many public apologies over an environmental disaster are only partial apologies.

Suggested Citation

  • Ben Gilbert & Alexander James & Jason F. Shogren, 2018. "Corporate apology for environmental damage," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 51-81, February.
  • Handle: RePEc:kap:jrisku:v:56:y:2018:i:1:d:10.1007_s11166-018-9276-4
    DOI: 10.1007/s11166-018-9276-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11166-018-9276-4
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s11166-018-9276-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mungan, Murat C., 2012. "Don’t Say You’re Sorry Unless You Mean It: Pricing apologies to achieve credibility," International Review of Law and Economics, Elsevier, vol. 32(1), pages 178-187.
    2. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    3. Loomis, John & Ekstrand, Earl, 1998. "Alternative approaches for incorporating respondent uncertainty when estimating willingness to pay: the case of the Mexican spotted owl," Ecological Economics, Elsevier, vol. 27(1), pages 29-41, October.
    4. Abeler, Johannes & Calaki, Juljana & Andree, Kai & Basek, Christoph, 2010. "The power of apology," Economics Letters, Elsevier, vol. 107(2), pages 233-235, May.
      • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    5. Schniter, Eric & Sheremeta, Roman M. & Sznycer, Daniel, 2013. "Building and rebuilding trust with promises and apologies," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 242-256.
    6. Kotchen Matthew & Moon Jon J., 2012. "Corporate Social Responsibility for Irresponsibility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-23, November.
    7. Lint Barrage & Eric Chyn & Justine Hastings, 2020. "Advertising and Environmental Stewardship: Evidence from the BP Oil Spill," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 33-61, February.
    8. Benjamin Ho & Elaine Liu, 2011. "Does sorry work? The impact of apology laws on medical malpractice," Journal of Risk and Uncertainty, Springer, vol. 43(2), pages 141-167, October.
    9. Krinsky, Itzhak & Robb, A Leslie, 1986. "On Approximating the Statistical Properties of Elasticities," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 715-719, November.
    10. William P. Bottom & Kevin Gibson & Steven E. Daniels & J. Keith Murnighan, 2002. "When Talk Is Not Cheap: Substantive Penance and Expressions of Intent in Rebuilding Cooperation," Organization Science, INFORMS, vol. 13(5), pages 497-513, October.
    11. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    12. Timothy Park & John B. Loomis & Michael Creel, 1991. "Confidence Intervals for Evaluating Benefits Estimates from Dichotomous Choice Contingent Valuation Studies," Land Economics, University of Wisconsin Press, vol. 67(1), pages 64-73.
    13. De Cremer, David, 2010. "To pay or to apologize? On the psychology of dealing with unfair offers in a dictator game," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 843-848, December.
    14. Gregory L. Poe & Kelly L. Giraud & John B. Loomis, 2005. "Computational Methods for Measuring the Difference of Empirical Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 353-365.
    15. Benjamin Ho, 2012. "Apologies as Signals: With Evidence from a Trust Game," Management Science, INFORMS, vol. 58(1), pages 141-158, January.
    16. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    17. De Cremer, David & van Dijk, Eric & Pillutla, Madan M., 2010. "Explaining Unfair Offers in Ultimatum Games and their Effects on Trust: An Experimental Approach," Business Ethics Quarterly, Cambridge University Press, vol. 20(1), pages 107-126, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Basil Halperin & Benjamin Ho & John List & Ian Muir, 2018. "Toward an understanding of the economics of apologies: evidence from a large-scale natural field experiment," Natural Field Experiments 00644, The Field Experiments Website.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Other publications TiSEM 252e9410-4c9f-4a40-9ab7-a, Tilburg University, School of Economics and Management.
    2. Verena Utikal, 2013. "I am sorry - Honest and Fake Apologies," Working Paper Series of the Department of Economics, University of Konstanz 2013-18, Department of Economics, University of Konstanz.
    3. Elias L Khalil & Nick Feltovich, 2018. "Moral licensing, instrumental apology and insincerity aversion: Taking Immanuel Kant to the lab," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-24, November.
    4. Srivastava, Vatsalya, 2017. "The Sorry Clause (revision of CentER DP 2016-008)," Discussion Paper 2017-002, Tilburg University, Center for Economic Research.
    5. Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Other publications TiSEM 5925920e-05c6-4ae0-8e76-d, Tilburg University, School of Economics and Management.
    6. Eric Schniter & Roman M. Sheremeta, 2014. "Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension," Working Papers 14-07, Chapman University, Economic Science Institute.
    7. Srivastava, Vatsalya, 2016. "The Sorry Clause," Other publications TiSEM 9340f3b1-ebf3-46b9-8ffd-3, Tilburg University, School of Economics and Management.
    8. Catherine M. H. Keske & Adam Mayer, 2014. "Visitor Willingness to Pay U.S. Forest Service Recreation Fees in New West Rural Mountain Economies," Economic Development Quarterly, , vol. 28(1), pages 87-100, February.
    9. Henry-Osorio, Miguel & Mittelhammer, Ronald C., 2012. "An Information-Theoretic Approach to Modeling Binary Choices: Estimating Willingness to Pay for Recreation Site Attributes," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123432, Agricultural and Applied Economics Association.
    10. Hermann Donfouet & P. Jeanty & P.-A. Mahieu, 2014. "Dealing with internal inconsistency in double-bounded dichotomous choice: an application to community-based health insurance," Empirical Economics, Springer, vol. 46(1), pages 317-328, February.
    11. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    12. Cailin O'Connor, 2019. "Methods, Models, and the Evolution of Moral Psychology," Papers 1909.09198, arXiv.org.
    13. Niroomand, Naghmeh & Jenkins, Glenn P., 2018. "A comparison of stated preference methods for the valuation of improvement in road safety," Economic Analysis and Policy, Elsevier, vol. 59(C), pages 138-149.
    14. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-004, Tilburg University, Tilburg Law and Economic Center.
    15. Basil Halperin & Benjamin Ho & John List & Ian Muir, 2018. "Toward an understanding of the economics of apologies: evidence from a large-scale natural field experiment," Natural Field Experiments 00644, The Field Experiments Website.
    16. Nikita Lyssenko & Roberto Mart, 2012. "Respondent uncertainty in contingent valuation: the case of whale conservation in Newfoundland and Labrador," Applied Economics, Taylor & Francis Journals, vol. 44(15), pages 1911-1930, May.
    17. Srivastava, Vatsalya, 2016. "The Sorry Clause," Discussion Paper 2016-008, Tilburg University, Center for Economic Research.
    18. Czajkowski, Mikolaj & Scasný, Milan, 2010. "Study on benefit transfer in an international setting. How to improve welfare estimates in the case of the countries' income heterogeneity?," Ecological Economics, Elsevier, vol. 69(12), pages 2409-2416, October.
    19. Mueller, Julie M., 2013. "Estimating Arizona residents’ willingness to pay to invest in research and development in solar energy," Energy Policy, Elsevier, vol. 53(C), pages 462-476.
    20. Huang, Lidingrong, 2021. "Do not apologise too early," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).

    More about this item

    Keywords

    Corporate social responsibility; Greenwashing; Apologies; Environmental disaster; Cheap talk;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:56:y:2018:i:1:d:10.1007_s11166-018-9276-4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.