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Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands

  • Fabrice Etilé

    (ALISS - Alimentation et sciences sociales - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - Institut national de la recherche agronomique (INRA) - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique)

  • Sabrina Teyssier


    (ALISS - Alimentation et sciences sociales - Institut national de la recherche agronomique (INRA))

For most consumers, Corporate Social Responsibility is a credence attribute of products, which can be signaled either through a label certified by a third party, or via unsubstantiated claims used as part of a brand-building strategy. These claims may, in theory, be regulated by reputation mechanisms and the awareness of NGOs and activists. We use an experimental posted-offer market with sellers and buyers to compare the impact of these signalling strategies on market efficiency. Both third-party certification and the possibility of CSRrelated brand building give rise to a separating equilibrium. However, only third-party certification clearly produces efficiency gains, by increasing CSR investments. In markets where reputation matters little, unsubstantiated claims can generate a 'halo' effect on consumers, whereby the latter are nudged into paying more for the same level of CSR investments by firms.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00736551.

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Date of creation: Sep 2012
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Handle: RePEc:hal:psewpa:halshs-00736551
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