The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms
The purpose of this paper is to investigate how socially concerned consumers' preferences affects firms' decisions to commit to social responsibility. In a market in which firms face the same demand function and products are homogeneous, we find that a large group of socially concerned consumers or a low cost of social responsibility induces an equilibrium outcome in which ethical and standard firms coexists in the same market. Our result is relevant because we do not assume a product differentiation setup and firms do not separate the market through labeling schemes.
|Date of creation:||18 Jan 2010|
|Date of revision:|
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