Do Legal Standards Affect Ethical Concerns of Consumers?

36 Pages Posted: 3 Nov 2008

See all articles by Dirk Engelmann

Dirk Engelmann

University of London - Royal Holloway - Department of Economics

Dorothea Kübler

Social Science Research Center (WZB); Technische Universität Berlin (TU Berlin) - Faculty of Economics and Management

Abstract

In order to address the impact of regulation on ethical concerns of consumers, we study the effect of a minimum wage. In our experimental market, consumers have monopsony power, firms engage in Bertrand competition, and workers are passive recipients of a wage payment. Two treatments are employed, one with no minimum wage in the first part but with a minimum wage in the second part, and one treatment with a minimum wage at the outset that is abolished in the second part. In both treatments, wages decrease over time in the first part even though some consumers show an interest in fair wages. If a minimum wage is in place, wages decline even faster. Introducing a minimum wage in a mature market raises average wages, while abolishing it lowers them. We discuss the implications of our results, such as the crowding out of ethical behavior through legal regulation.

Keywords: fairness, crowding out, consumer behavior, minimum wage, experimental economics

JEL Classification: C91, J88, K31

Suggested Citation

Engelmann, Dirk and Kübler, Dorothea F., Do Legal Standards Affect Ethical Concerns of Consumers?. IZA Discussion Paper No. 3266, Available at SSRN: https://ssrn.com/abstract=1294515 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Dirk Engelmann (Contact Author)

University of London - Royal Holloway - Department of Economics ( email )

Egham, TW20 0EX
United Kingdom

Dorothea F. Kübler

Social Science Research Center (WZB) ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany
40 30 25491440 (Phone)

HOME PAGE: http://www.wzb.eu/mp/vam/people/dorothea_kuebler.de.htm

Technische Universität Berlin (TU Berlin) - Faculty of Economics and Management ( email )

D-10623 Berlin
Germany
+49 30 31425263 (Phone)

HOME PAGE: http://www.wiwi-experimente.tu-berlin.de/

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