Informed Consumers Undermine Product Protests

Tajika, Tomoya (2024): Informed Consumers Undermine Product Protests.

Abstract

We model a protest against a firm aiming to remove a product that causes negative externalities. Both the firm and consumers are uncertain about the product’s value, but consumers receive noisy signals. Price plays a key role in aggregating information. When prices are high, consumers with both good and bad signals derive almost the same utility from the product being sold, making protests uninformative. By endogenizing the price, we show that as consumer signals improve, protests become less informative, reducing social welfare. This suggests that consumer ignorance may play a role in protest success.

• Item Type: MPRA Paper
• Language: English
• Keywords: Protest, boycotts, information aggregation, ethical voters, monopoly pricing
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D42 - Monopoly; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

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