Munich Personal RePEc Archive

The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms

Fanelli, Domenico (2010): The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms.

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Abstract

The purpose of this paper is to investigate how socially concerned consumers' preferences affects firms' decisions to commit to social responsibility. In a market in which firms face the same demand function and products are homogeneous, we find that a large group of socially concerned consumers or a low cost of social responsibility induces an equilibrium outcome in which ethical and standard firms coexists in the same market. Our result is relevant because we do not assume a product differentiation setup and firms do not separate the market through labeling schemes.

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