The Benefits of Intentions: Deliberate Harm Avoidance and Consumer Responses

This paper investigates why firms engage in costly environmental and ethical practices, focusing on whether consumer responses depend on firms intentions or outcomes. Existing literature links ESG practices to positive performance and stakeholder rewards, but most evidence is observational and cannot disentangle intentionality from outcomes. Using a controlled experiment, we examine consumer reactions when firms choose between a -clean- technology (avoiding harm at a cost) and a -dirty- technology (higher returns with negative externalities). Two treatments isolate intentionality: Random Choice versus Willful Choice. After observing the firms choice and the resulting externality, consumers can respond by transferring (taking away) resources to the firm in a give-or-take Dictator Game. We find a pronounced asymmetry in how intentions matter. Consumers punish firms whenever a negative externality is incurred, regardless of intentionality, indicating that punitive responses are largely outcome-driven. By contrast, when harm is avoided, intentions play a central role. Firms that deliberately choose to prevent a negative externality are treated with significantly greater leniency than firms for which absence of harm arises randomly, reflected in positive transfers on average. These findings highlight that intentionality affects punitive responses and helps explain why firms may voluntarily adopt costly ethical practices when choices are observable.