Do Markets Erode Social Responsibility?

Abstract

This article 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 characteristics, such as increased seller competition and limited consumer information, and it responds to 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 nonmarket 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. 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 characteristics, such as increased seller competition and limited consumer information, and it responds to 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. JEL Codes: C92, D03, D62, M14 * We are grateful to two editors, Lawrence Katz and Andrei Shleifer, and three anonymous referees for helpful suggestions that improved the paper. We also thank

Can Collusion Promote Corporate Social Responsibility? Evidence from the Lab

“…See Schinkel & Spiegel (2017). 16 In Bartling et al (2015), both the number of firms and the number of consumers is larger than in ours. For statistical reasons, we kept the number of participants in a market as low as possible.…”

“…In part 2, we let participants interact in 24 rounds of the market game using a variant of the experimental paradigm introduced by Bartling et al (2015). 15 In each round, participants were randomly assigned to groups of four.…”

“…Cai & Liu (2009) report that firms in more competitive markets engage in more tax avoidance activities in China; Brekke et al (2017) and Markussen & Røed (2017) discover that general practitioners in Norway are more lenient gatekeepers, the more competitive the market for their services is; Lee et al (2018) observe less CSR activity in the more competitive markets in South Korea. While Falk & Szech (2013) and Bartling et al (2015) observe that intrinsic CSR behavior may be eroded in market settings, they find no significant effects on CSR activities from varying the number of competing subjects. 3 Business Roundtable, Statement on the Purpose of a Corporation, 19 August, 2019. https://opportunity.businessroundtable.org/ourcommitment/.…”

“…As a first step in addressing this question, we conducted three laboratory experiments. Our experiments closely follow the experimental paradigm developed by Bartling et al (2015) to study socially responsible behavior in markets. Participants playing the role of firms choose between offering a 'fair' and an 'unfair' good to a consumer participant, where they could or could not coordinate on the kind of goods offered, depending on the treatment.…”

From Bounded Morality to Consumer Social Responsibility: A Transdisciplinary Approach to Socially Responsible Consumption and Its Obstacles

“…Here, the latter part supports the implication that being aware of the foreseeable consequences of one's actions does not necessarily mean that moral intensity is sufficiently high in other respects. Moreover, this finding also points to the issue that (more complex) market structures may 'erode' social responsibility (see also Bartling et al 2015;or Irlenbusch and Saxler 2015, on a related note).…”