How much are you willing to pay to be ethical? An experiment

Focusing on consumer co-operatives, I test the conventional economic worldview that relative price is a main determinant of consumer behaviour using survey instruments in a classroom setting. I examine the role which non-economic variables such as ’warm glow’ might play in determining demand. My ï¬ ndings challenge the narrow economic worldview that only economic variables count; but support a core assumption that economic variables are of fundamental importance to individuals’ choice decisions. Signiï¬ cantly, individuals are willing to pay higher prices for co-operative products even if they are not co-op members. However, as the price of co-operative products increases relative to the products of non-co-operatives, demand falls amongst both non-members and members of co-operatives. But demand is more inelastic for co-op members. When price is the same for co-ops and non-co-ops, even non-co-op members prefer to purchase products sold by co-operatives. The co-operative advantage provides co-ops with a protective belt against competition from non-cooperatives. This also speaks to the potential strength of consumer co-ops in competitive markets. Firms that invest in both economic and non-economic determinants of consumer demand should be characterized by a signiï¬ cant competitive advantage.