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To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets

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  • Jean-Robert Tyran
  • Dirk Engelmann

Abstract

We experimentally investigate how firms and consumers react to a sudden cost increase in a competitive retail market. We compare two conditions which exclusively differ with respect to how difficult it is to organize and enforce boycotts. We find that cost increases translate into sudden price increases, and that these frequently trigger consumer boycotts. However, consumer boycotts are un-successful in holding down market prices even if collective action problems are completely eliminated. While consumer boycotts do not increase consumer rent, they reduce firm profits and market efficiency. Consumer boycotts apparently serve to punish firms for seemingly unfair price increases.

Suggested Citation

  • Jean-Robert Tyran & Dirk Engelmann, 2002. "To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets," University of St. Gallen Department of Economics working paper series 2002 2002-13, Department of Economics, University of St. Gallen.
    • Handle: RePEc:usg:dp2002:2002-13
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    References listed on IDEAS

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    2. Ernst Fehr & Klaus M. Schmidt, "undated". "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
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    5. Sen, Sankar & Gurhan-Canli, Zeynep & Morwitz, Vicki, 2001. "Withholding Consumption: A Social Dilemma Perspective on Consumer Boycotts," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 28(3), pages 399-417, December.
    6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-741, September.
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    Cited by:

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    2. Bruno Frey & Matthias Benz & Alois Stutzer, 2004. "Introducing Procedural Utility: Not Only What, but Also How Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(3), pages 377-401, September.
    3. Omar Al Serhan & Elias Boukrami, 2015. "Mapping studies on consumer boycotting in international marketing," Transnational Marketing Journal, Oxbridge Publishing House, UK, vol. 3(2), pages 130-151, October.

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    More about this item

    Keywords

    Posted-offer markets; consumer boycotts; collective action;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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