Ethical Differentiation and Market Behavior: An Experimental Approach

UPF Economics and Business Working Paper 779

32 Pages Posted: 16 Nov 2005

See all articles by Robin M. Hogarth

Robin M. Hogarth

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Marc Le Menestrel

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Julian Rode

Helmholtz-Centre for Environmental Research - UFZ

Date Written: October 2004

Abstract

We constructed triopolistic experimental markets where producers set prices. One producer's costs were higher than the others. In two experiments, costs were attributed to compliance with ethical guidelines. In the third, no justification was provided. Consumers paid premia for the ethically differentiated product and even larger premia if they did not know the producers' 'ethical' costs. Individual differences were important (students of business/economics paid smaller premia than others). We also provide evidence consistent with a large attitude-behavior gap for ethical consumption. Finally, we speculate about the observed 'demand function' for ethics and emphasize the potential of experimental methodology for understanding contextual effects in market settings.

Keywords: Fair trade, ethical premia, price competition, contextual effects

JEL Classification: A13, B41, D43, D46

Suggested Citation

Hogarth, Robin M. and Le Menestrel, Marc and Rode, Julian, Ethical Differentiation and Market Behavior: An Experimental Approach (October 2004). UPF Economics and Business Working Paper 779, Available at SSRN: https://ssrn.com/abstract=848628 or http://dx.doi.org/10.2139/ssrn.848628

Robin M. Hogarth (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
34 93 542 2561 (Phone)
34 93 542 1746 (Fax)

Marc Le Menestrel

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
34 93 542 27 23 (Phone)
34 93 542 17 46 (Fax)

Julian Rode

Helmholtz-Centre for Environmental Research - UFZ ( email )

Department of Economics
Permoserstr. 15
Leipzig, 04279
Germany

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