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Do Legal Standards Affect Ethical Concerns of Consumers? An Experiment on Minimum Wages

Author

Listed:
  • Danz, David
  • Engelmann, Dirk
  • Kübler, Dorothea

Abstract

To address the impact of regulation on ethical concerns of consumers, we study the example of minimum wages. In our experimental market, consumers have monopsony power, firms set prices and wages, and workers are passive recipients of a wage payment. We find that the consumers exhibit considerable fairness towards the workers by buying from the firm with the higher price and the higher wage. We also find that consumers have a tendency to split their demand equally between firms, which is a simple strategy to provide both workers with a minimal payoff. Introducing a minimum wage in a mature market raises average wages despite its significant crowding-out effects on consumers' fairness concerns. Abolishing a minimum wage crowds in consumers' fairness concerns, but crowding in is not sufficient to avoid overall negative effects on the workers' wages.

Suggested Citation

  • Danz, David & Engelmann, Dirk & Kübler, Dorothea, 2012. "Do Legal Standards Affect Ethical Concerns of Consumers? An Experiment on Minimum Wages," Working Papers 12-03, University of Mannheim, Department of Economics.
  • Handle: RePEc:mnh:wpaper:30146
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rockenbach, Bettina & Pigors, Mark, 2015. "Consumer Social Responsibility," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113139, Verein für Socialpolitik / German Economic Association.
    2. Jana Friedrichsen & Dirk Engelmann, 2017. "Who Cares about Social Image?," Discussion Papers of DIW Berlin 1634, DIW Berlin, German Institute for Economic Research.
    3. Marieta Valente, 2015. "Ethical Differentiation and Consumption in an Incentivized Market Experiment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(1), pages 51-69, August.
    4. Jana Friedrichsen, 2017. "Is Socially Responsible Production a Normal Good?," Discussion Papers of DIW Berlin 1644, DIW Berlin, German Institute for Economic Research.
    5. Engelmann, Dirk & Friedrichsen, Jana & Kübler, Dorothea, 2018. "Fairness in Markets and Market Experiments," Rationality and Competition Discussion Paper Series 64, CRC TRR 190 Rationality and Competition.

    More about this item

    Keywords

    Fairness ; crowding out ; consumer behavior ; minimum wage ; experimental economics;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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