From boycott to buycott: is activism from the North good for the South?

This article provides an original theoretical exploration of the potential effects of northern activism on labor conditions and welfare in the South using a duopoly model with endogenous prices, wages and qualities. We assume that all consumers derive the same utility from one (“northern") good but are heterogeneous with respect to the other (“southern") good. This asymmetry captures in a stylized fashion the consensus among northern consumers on the labor conditions prevailing in the North and their ambivalence concerning labor practices in the South. A greater consumer’s social consciousness can be seen as a punishment (boycott) for harmful practices or a reward (buycott) for more virtuous practices. If both forms of activism seem to have the same objectives, one should prefer an activism based on positive information. In an in-depth analysis of a boycott and a buycott campaign, we show that the less socially conscious a firm, the higher the likelihood to be targeted by a boycott or a buycott campaign. A higher quality may reduce this likelihood to be targeted. Northern firm should prefer boycott to buycott whereas southern one always prefer buycott. We also show that consumer surplus may decrease with the both form of activism.