Corporate and Consumer Social Responsibilities: Label Regulations in the Lab
Although consumer attitudes toward corporate social responsibility are positive, socially responsible (SR) products are far from gaining significant market shares. Information asymmetries have been identified as one of the factor contributing to this attitude-behaviour gap, because social responsibility is a credence attribute. Signalling may remedy this market failure. We use an experimental posted offer market to investigate the impact of various regulatory requirements for labels on sellers’ choice to supply SR products and to signal it, and on buyers’ choice of ethical quality. Three treatments are tested: label certification by a third-party, “cheap-talk signalling” with random monitoring and with or without reputations. Individual social preferences are elicited prior to the game, and their distribution generates a positive supply of and demand for social responsibility. When there is third-party certification or cheap-talk signalling with random monitoring and reputations, a separating equilibrium emerges, whereby labelled and non-labelled goods are exchanged at different prices. However, efficiency gains are significant only for third-party certification. Cheap-talk signalling with random monitoring but without reputations does not yield efficiency gains. Moreover, it generates a “halo” effect, whereby buyers are misguided by sellers’ claims about product quality. Finally, individual social preferences have a significant effect on players’ decisions. Only third-party certification can increase companies’ social responsibility and can allow consumers to express their social preferences through consumption.
|Date of creation:||2011|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles R. Plott & Vernon L. Smith, 1978.
"An Experimental Examination of Two Exchange Institutions,"
Review of Economic Studies,
Oxford University Press, vol. 45(1), pages 133-153.
- Plott, Charles R. & Smith, Vernon L., "undated". "An Experimental Examination of Two Exchange Institutions," Working Papers 83, California Institute of Technology, Division of the Humanities and Social Sciences.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
- Julian Rode & Robin Hogarth & Marc Le Menestrel, 2004.
"Ethical differentiation and market behavior: An experimental approach,"
Economics Working Papers
779, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2006.
- Rode, Julian & Hogarth, Robin M. & Le Menestrel, Marc, 2008. "Ethical differentiation and market behavior: An experimental approach," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 265-280, May.
- Julian Rode & Robin Hogarth & Marc Le Menestrel, 2005. "Ethical differentiation and market behavior: An experimental approach," Working Papers 112, Barcelona Graduate School of Economics.
- Cason, T.N. & Gangadharan, L., 1999.
"Environmental Labeling and Incomplete Consumer Information in Laboratory Markets,"
Department of Economics - Working Papers Series
708, The University of Melbourne.
- Cason, Timothy N. & Gangadharan, Lata, 2002. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 113-134, January.
- M. Krause & S. Kröger & J. Potters, 2004.
"Insights from Experimental Economics for Market Regulation,"
Review of Business and Economic Literature,
KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(2), pages 217-238.
- Krause, M. & Kroger, S. & Potters, J.J.M., 2004. "Insights from experimental economics for market regulation," Other publications TiSEM c48f9789-fa18-4aba-a084-4, Tilburg University, School of Economics and Management.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:120399. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.