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Informational Benefits of International Environmental Agreements

Author

Listed:
  • Amihai Glazer

    (Department of Economics, University of California-Irvine)

  • Vesa Kanniainen

    (Department of Economics, University of Helsinki)

  • Panu Poutvaara

    (Department of Economics, University of Helsinki)

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. "Informational Benefits of International Environmental Agreements," Working Papers 070818, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:070818
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    File URL: https://www.economics.uci.edu/files/docs/workingpapers/2007-08/glazer-18.pdf
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    References listed on IDEAS

    as
    1. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2005. "International Environmental Agreements and Strategic Voting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 175-195, March.
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    4. Parkash Chander & Henry Tulkens, 2006. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 176-193, Springer.
    5. Murdoch, James C. & Sandler, Todd & Vijverberg, Wim P. M., 2003. "The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis," Journal of Public Economics, Elsevier, vol. 87(2), pages 337-362, February.
    6. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
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    11. 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.
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    Citations

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    Cited by:

    1. Kimiko Terai, 2012. "Financial Mechanism and Enforceability of International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(2), pages 297-308, October.
    2. Alexandre SAUQUET, 2011. "Exploring the Nature of Strategic Interactions in the Ratification Process of the Kyoto Protocol," Working Papers 201119, CERDI.
    3. Alexandre Sauquet, 2014. "Exploring the nature of inter-country interactions in the process of ratifying international environmental agreements: the case of the Kyoto Protocol," Public Choice, Springer, vol. 159(1), pages 141-158, April.

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    More about this item

    Keywords

    Firm's ethical code; Consumer morality; Boycotts;
    All these keywords.

    JEL classification:

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

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