Firms Ethics, Consumer Boycotts, and Signaling

Amihai Glazer, Vesa Kanniainen, Panu Poutvaara

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    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.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherCentre for Economic and Business Research, Copenhagen Business School
    Number of pages21
    Publication statusPublished - 2008
    SeriesCEBR Discussion Paper
    Number2008-08

    Cite this

    Glazer, A., Kanniainen, V., & Poutvaara, P. (2008). Firms Ethics, Consumer Boycotts, and Signaling. Centre for Economic and Business Research, Copenhagen Business School. CEBR Discussion Paper, No. 2008-08