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Firms' Ethics, Consumer Boycotts, and Signalling

Author

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  • Glazer, Amihai

    () (University of California, Irvine)

  • Kanniainen, Vesa

    () (University of Helsinki)

  • Poutvaara, Panu

    () (University of Munich)

Abstract

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

  • Glazer, Amihai & Kanniainen, Vesa & Poutvaara, Panu, 2008. "Firms' Ethics, Consumer Boycotts, and Signalling," IZA Discussion Papers 3498, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3498
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    References listed on IDEAS

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    1. 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.
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    5. Baron, David P., 2002. "Private Politics and Private Policy: A Theory of Boycotts," Research Papers 1766, Stanford University, Graduate School of Business.
    6. Berentsen, Aleksander & Bruegger, Esther & Loertscher, Simon, 2008. "On cheating, doping and whistleblowing," European Journal of Political Economy, Elsevier, vol. 24(2), pages 415-436, June.
    7. Ken Binmore, 1998. "Game Theory and the Social Contract - Vol. 2: Just Playing," MIT Press Books, The MIT Press, edition 1, volume 2, number 0262024446.
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    Cited by:

    1. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(2).
    2. Fabrice Etilé & Sabrina Teyssier, 2013. "Corporate social responsibility and the economics of consumer social responsibility," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00879782, HAL.
    3. Jan Schmitz & Jan Schrader, 2015. "Corporate Social Responsibility: A Microeconomic Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 27-45, February.
    4. Suzanne C. Makarem & Haeran Jae, 2016. "Consumer Boycott Behavior: An Exploratory Analysis of Twitter Feeds," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(1), pages 193-223, March.
    5. Vesa Kanniainen, 2016. "Making the World a Better Place: Consumers' Group Identity in the Markets with Competition and Two-sided Opportunism," CESifo Working Paper Series 5842, CESifo Group Munich.
    6. Margaryta Klymak, 2017. "The Trade Impacts of the Naming and Shaming of Forced and Child Labor," Trinity Economics Papers tep1517, Trinity College Dublin, Department of Economics.
    7. Johan Graafland & Hugo Smid, 2015. "Competition and Institutional Drivers of Corporate Social Performance," De Economist, Springer, vol. 163(3), pages 303-322, September.
    8. Leonardo Becchetti & Nazaria Solferino & M. Tessitore, 2015. "How to safeguard world heritage sites? A theoretical model of “cultural responsibility”," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(3), pages 223-248, September.
    9. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(2).
    10. Hans Pitlik, 2016. "Who Disapproves of TTIP? Multiple Distrust in Companies and Political Institutions," WIFO Working Papers 513, WIFO.
    11. Markus Leibrecht & Hans Pitlik, 2018. "Is Trust in Companies Rooted in Social Trust, or Regulatory Quality, or Both?," WIFO Working Papers 564, WIFO.

    More about this item

    Keywords

    boycotts; consumer morality; firm’s ethical code;

    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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