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To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets

  • Jean-Robert Tyran

    ()

  • Dirk Engelmann

    ()

We experimentally investigate how firms and consumers react to a sudden cost increase in a competitive retail market. We compare two conditions which exclusively differ with respect to how difficult it is to organize and enforce boycotts. We find that cost increases translate into sudden price increases, and that these frequently trigger consumer boycotts. However, consumer boycotts are un-successful in holding down market prices even if collective action problems are completely eliminated. While consumer boycotts do not increase consumer rent, they reduce firm profits and market efficiency. Consumer boycotts apparently serve to punish firms for seemingly unfair price increases.

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File URL: http://www1.vwa.unisg.ch/RePEc/usg/dp2002/dp0213tyran_ganz.pdf
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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2002 with number 2002-13.

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Length: 35 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:usg:dp2002:2002-13
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  1. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  2. Theodore C. Bergstrom, 2001. "Free Labour for Costly Journals?," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 183-198, Fall.
  3. Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer, vol. 16(3), pages 529-544.
  4. Kachelmeier, Steven J. & Limberg, Stephen T. & Schadewald, Michael S., 1991. "Fairness in markets: A laboratory investigation," Journal of Economic Psychology, Elsevier, vol. 12(3), pages 447-464, September.
  5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  6. Miller, Kenneth E & Sturdivant, Frederick D, 1977. " Consumer Responses to Socially Questionable Corporate Behavior: An Empirical Test," Journal of Consumer Research, University of Chicago Press, vol. 4(1), pages 1-7, June.
  7. Franciosi, Robert, et al, 1995. "Fairness: Effect on Temporary and Equilibrium Prices in Posted-Offer Markets," Economic Journal, Royal Economic Society, vol. 105(431), pages 938-50, July.
  8. Sen, Sankar & Gurhan-Canli, Zeynep & Morwitz, Vicki, 2001. " Withholding Consumption: A Social Dilemma Perspective on Consumer Boycotts," Journal of Consumer Research, University of Chicago Press, vol. 28(3), pages 399-417, December.
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