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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.

Suggested Citation

  • Amihai Glazer & Vesa Kanniainen & Panu Poutvaara, 2008. "Informational Benefits of International Environmental Agreements," Working Papers 070818, University of California-Irvine, Department of Economics.
  • Handle: RePEc:irv:wpaper:070818

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    References listed on IDEAS

    1. 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, March.
    2. 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, April.
    3. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
    4. Parkash Chander & Henry Tulkens, 1995. "A core-theoretic solution for the design of cooperative agreements on transfrontier pollution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 279-293, August.
    5. 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.
    6. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    7. Baron, David P., 2002. "Private Politics and Private Policy: A Theory of Boycotts," Research Papers 1766, Stanford University, Graduate School of Business.
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    Cited by:

    1. Kimiko Terai, 2012. "Financial Mechanism and Enforceability of International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(2), pages 297-308, October.
    2. Alexandre Sauquet, 2014. "Exploring the nature of inter-country interactions in the process of ratifying international environmental agreements: the case of the Kyoto Protocol," Public Choice, Springer, vol. 159(1), pages 141-158, April.

    More about this item


    Firm's ethical code; Consumer morality; Boycotts;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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