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Informational Benefits of International Environmental Agreements

  • Amihai Glazer

    ()

    (Department of Economics, University of California-Irvine)

  • Vesa Kanniainen

    ()

    (Department of Economics, University of Helsinki)

  • Panu Poutvaara

    ()

    (Department of Economics, University of Helsinki)

This paper develops a theory of consumer boycotts. Some consumers care not only about the products they buy but also about whether the firm behaves ethically. Other consumers do not care about the behavior of the firm but yet may like to give the impression of being ethical consumers. Consequently, 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. In the firm's choice between ethical and unethical behavior, the optimality of mixed and pure strategies depends on the cost of behaving ethically. In particular, when the cost is (relatively) low, ethical behavior arises from a prisoners' dilemma as the firm's optimal strategy.

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File URL: http://www.economics.uci.edu/files/docs/workingpapers/2007-08/glazer-18.pdf
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Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 070818.

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Length: 16 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:irv:wpaper:070818
Contact details of provider: Postal: Irvine, CA 92697-3125
Phone: (949) 824-5788
Web page: http://www.economics.uci.edu/
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  1. Baron, David P., 2002. "Private Politics and Private Policy: A Theory of Boycotts," Research Papers 1766, Stanford University, Graduate School of Business.
  2. Murdoch, James C. & Sandler, Todd & Vijverberg, Wim P. M., 2003. "The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis," Journal of Public Economics, Elsevier, vol. 87(2), pages 337-362, February.
  3. repec:dgr:kubcen:19935 is not listed on IDEAS
  4. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
  5. Chander, P. & Tulkens, H., . "A core-theoretic solution for the design of cooperative agreements on transfrontier pollution," CORE Discussion Papers RP -1158, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Robert Innes, 2006. "A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition," Economic Journal, Royal Economic Society, vol. 116(511), pages 355-381, 04.
  7. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2005. "International Environmental Agreements and Strategic Voting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 175-195, 03.
  8. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
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