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Firms’ Ethics, Consumer Boycotts, and Signalling

Author

Listed:
  • Amihai Glazer
  • Vesa Kanniainen
  • Panu Poutvaara

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.

Suggested Citation

  • Amihai Glazer & Vesa Kanniainen & Panu Poutvaara, 2008. "Firms’ Ethics, Consumer Boycotts, and Signalling," CESifo Working Paper Series 2323, CESifo.
    • Handle: RePEc:ces:ceswps:_2323
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    References listed on IDEAS

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    Cited by:

    1. Margaryta Klymak, 2017. "The Trade Impacts of the Naming and Shaming of Forced and Child Labor," Trinity Economics Papers tep1517, Trinity College Dublin, Department of Economics.
    2. Johan Graafland & Hugo Smid, 2015. "Competition and Institutional Drivers of Corporate Social Performance," De Economist, Springer, vol. 163(3), pages 303-322, September.
    3. Leonardo Becchetti & Nazaria Solferino & M. Tessitore, 2015. "How to safeguard world heritage sites? A theoretical model of “cultural responsibility”," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(3), pages 223-248, September.
    4. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(2).
    5. Hans Pitlik, 2016. "Who Disapproves of TTIP? Multiple Distrust in Companies and Political Institutions," WIFO Working Papers 513, WIFO.
    6. Jan Schmitz & Jan Schrader, 2015. "Corporate Social Responsibility: A Microeconomic Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 27-45, February.
    7. Markus Leibrecht & Hans Pitlik, 2018. "Is Trust in Companies Rooted in Social Trust, or Regulatory Quality, or Both?," WIFO Working Papers 564, WIFO.
    8. Suzanne C. Makarem & Haeran Jae, 2016. "Consumer Boycott Behavior: An Exploratory Analysis of Twitter Feeds," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(1), pages 193-223, March.
    9. Vesa Kanniainen, 2016. "Making the World a Better Place: Consumers' Group Identity in the Markets with Competition and Two-sided Opportunism," CESifo Working Paper Series 5842, CESifo.

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    More about this item

    Keywords

    firm's ethical code; consumer morality; boycotts;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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