Morals in Multi-unit Markets

Tinbergen Institute Discussion Paper 2020-072/I

102 Pages Posted: 7 Dec 2020 Last revised: 21 Nov 2022

See all articles by Andreas G. B. Ziegler

Andreas G. B. Ziegler

University of Amsterdam

Giorgia Romagnoli

CREED; Tinbergen Institute

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Date Written: February 9, 2021

Abstract

We examine how the erosion of morals, norms and norm compliance in markets depend on the market power of individual traders. Previously studied markets allow traders to trade at most one unit and provide market power to individual traders by de-activating the roles of two forces: (i) the replacement logic, whereby immoral trading is justified by the belief that others would trade otherwise; (ii) market selection, by which the least moral trader determines quantities. In an experiment, we compare single-unit to (more common) multi-unit markets which may activate these forces. We find that multi-unit markets result in partial norm erosion; moreover, in contrast to single-unit markets, they lead to a full erosion of morals and norm compliance. The replacement logic is the main mechanism driving this finding.

Keywords: replacement logic, social responsibility, markets, externalities, competition, charity

JEL Classification: D62, C91, C92

Suggested Citation

Ziegler, Andreas G. B. and Romagnoli, Giorgia and Offerman, Theo, Morals in Multi-unit Markets (February 9, 2021). Tinbergen Institute Discussion Paper 2020-072/I, Available at SSRN: https://ssrn.com/abstract=3710813 or http://dx.doi.org/10.2139/ssrn.3710813

Andreas G. B. Ziegler (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Giorgia Romagnoli

CREED ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

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