IDEAS home Printed from https://ideas.repec.org/p/ala/wpaper/2017-02.html
   My bibliography  Save this paper

Corporate Apology for Environmental Damage

Author

Listed:
  • Ben Gilbert

    () (Division of Economics and Business, Colorado School of Mines)

  • Alexander James

    () (Department of Economics and Public Policy, University of Alaska Anchorage)

  • Jason Shogren

    () (Department of Economics, 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 Shogren, 2017. "Corporate Apology for Environmental Damage," Working Papers 2017-02, University of Alaska Anchorage, Department of Economics.
  • Handle: RePEc:ala:wpaper:2017-02
    as

    Download full text from publisher

    File URL: http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201702.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. Benjamin Ho, 2012. "Apologies as Signals: With Evidence from a Trust Game," Management Science, INFORMS, vol. 58(1), pages 141-158, January.
    14. 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.
      • 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.
    15. 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.
    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.

    More about this item

    Keywords

    apologies; environmental disaster; oil spill; cheap talk;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ala:wpaper:2017-02. 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: (Jonathan Alevy). General contact details of provider: http://edirc.repec.org/data/ecuaaus.html .

    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 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.

    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.