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Do Markets Erode Social Responsibility?

82 Pages Posted: 21 Nov 2013 Last revised: 7 Jan 2015

Björn Bartling

University of Zurich - Department of Economics; Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Lan Yao

Shanghai University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 07, 2015

Abstract

This paper studies socially responsible behavior in markets. We develop a laboratory product market in which low-cost production creates a negative externality for third parties, but where alternative production with higher costs mitigates the externality. Our first study, conducted in Switzerland, reveals a persistent preference among many consumers and firms for avoiding negative social impact in the market, reflected both in the composition of product types and in a price premium for socially responsible products. Socially responsible behavior is generally robust to varying market settings, such as increased seller competition and limited consumer information, and it responds to costs and prices in a manner consistent with a model in which positive social impact is a utility-enhancing feature of a consumer product. In a second study, we investigate whether market social responsibility varies across societies by comparing market behavior in Switzerland and China. While subjects in Switzerland and China do not differ in their degree of social concern in non-market contexts, we find that low-cost production that creates negative externalities is significantly more prevalent in markets in China. Across both studies, consumers in markets exhibit less social concern than subjects in a comparable individual choice context, though the difference is much smaller in Switzerland.

Keywords: Social responsibility, markets, externalities, competition, cultural differences

JEL Classification: C92, D03, D62, M14

Suggested Citation

Bartling, Björn and Weber, Roberto A. and Yao, Lan, Do Markets Erode Social Responsibility? (January 07, 2015). Forthcoming in: Quarterly Journal of Economics. Available at SSRN: https://ssrn.com/abstract=2357561 or http://dx.doi.org/10.2139/ssrn.2357561

Björn Bartling (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Roberto A. Weber

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Lan Yao

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

HOME PAGE: http://se.shufe.edu.cn/structure/econ/people/faz_30133_1.htm

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