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Firms’ Ethics, Consumer Boycotts, and Signalling

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Author Info
Glazer, Amihai () (University of California, Irvine)
Kanniainen, Vesa () (University of Helsinki)
Poutvaara, Panu () (University of Helsinki)

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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.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3498.

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Date of creation: May 2008
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Publication status: forthcoming in: European Journal of Political Economy
Handle: RePEc:iza:izadps:dp3498

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Related research
Keywords: firm’s ethical code; consumer morality; boycotts;

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Find related papers by JEL classification:
M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andrea C. Morales, 2005. "Giving Firms an "E" for Effort: Consumer Responses to High-Effort Firms," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 31(4), pages 806-812, 03. [Downloadable!] (restricted)
  2. 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, 04. [Downloadable!] (restricted)
  3. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn. [Downloadable!] (restricted)
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