Signaling Corporate Social Responsibility: Third‐Party Certification Versus Brands
36 Pages Posted: 28 Jun 2016
Date Written: July 2016
Corporate social responsibility (CSR) is a credence attribute of products, which can be signaled either through a label certified by a third party, or via unsubstantiated claims used as part of a brand‐building strategy. We use an experimental posted‐offer market with sellers and buyers to compare the impact of these signaling strategies on market efficiency. Only third‐party certification gives rise to a separating equilibrium and an increase in CSR investments. Unsubstantiated claims can generate a halo effect on consumers, whereby the latter are nudged into paying more for the same level of CSR investments by firms.
Keywords: Claim, halo effect, label, market experiment, social preferences
JEL Classification: C92, D82, L15, M14
Suggested Citation: Suggested Citation