Abstract
We investigate the emergence of socially responsible (SR) production through consumer decisions. Our experimental treatments vary market competitiveness and consumers’ information on social responsibility in production. We show that—irrespective of consumers’ information—SR production reduces monopolistic supplier’s profit and is therefore unlikely to emerge. With supplier competition, SR production positively influences consumers’ buying decisions and suppliers offering SR products achieve significantly higher profits, as long as their price is not too high. Our results yield valuable insights into the possibilities and limitations of promoting SR production through consumer behavior, and they provide evidence for positive effects of competition on moral behavior. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2279 . This paper was accepted by Uri Gneezy, behavioral economics.
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