Strategic Pricing and the Collapse of Protest Informativeness

Tajika, Tomoya (2025): Strategic Pricing and the Collapse of Protest Informativeness.

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

References

Ali, S. N., & Lin, C. (2013). Why People Vote: Ethical Motives and Social Incentives. American Economic Journal: Microeconomics, 5(2), 73–98.

Baron, D. P. (2001). Private Politics, Corporate Social Responsibility, and Integrated Strategy. Journal of Economics & Management Strategy, 10(1), 7–45.

Baron, D. P. (2003). Private politics. Journal of Economics & Management Strategy, 12(1), 31–66.

Battaglini, M. (2017). Public protests and policy making. The Quarterly Journal of Economics, 132(1), 485–549.

Battaglini, M., Morton, R. B., & Patacchini, E. (2020). Social groups and the effectiveness of protests. Working paper: National Bureau of Economic Research.

Correa, S. (2024). Persistent protests. American Economic Journal: Microeconomics. Forthcoming

Delacote, P. (2009). On the sources of consumer boycotts ineffectiveness. The Journal of Environment & Development, 18(3), 306–322.

Diermeier, D., & Van Mieghem, J. A. (2008). Voting with your pocketbook—a stochastic model of consumer boycotts. Mathematical and Computer Modelling, 48(9–10), 1497– 1509.

Egorov, G., & Harstad, B. (2017). Private politics and public regulation. The Review of Economic Studies, 84(4), 1652–1682.

Ekmekci, M., & Lauermann, S. (2022). Informal elections with dispersed information. Workng paper: University of Bonn and University of Mannheim.

Feddersen, T. J., & Gilligan, T. W. (2001). Saints and Markets: Activists and the Supply of Credence Goods. Journal of Economics & Management Strategy, 10(1), 149–171.

Feddersen, T., & Sandroni, A. (2006). A Theory of Participation in Elections. American Economic Review, 96(4), 1271–1282.

Fischer, P., & Huddart, S. (2008). Optimal Contracting with Endogenous Social Norms. American Economic Review, 98(4), 1459–1475.

Glazer, A., Kanniainen, V., & Poutvaara, P. (2010). Firms' ethics, consumer boycotts, and signalling. European Journal of Political Economy, 26(3), 340–350.

Heijnen, P., & Made, A. van der. (2012). A signaling theory of consumer boycotts. Journal of Environmental Economics and Management, 63(3), 404–418.

Hendel, I., Lach, S., & Spiegel, Y. (2017). Consumers' activism: the cottage cheese boycott. The RAND Journal of Economics, 48(4), 972–1003.

Innes, R. (2006). A theory of consumer boycotts under symmetric information and imperfect competition. The Economic Journal, 116(511), 355–381.

Miyagiwa, K. (2009). Saving dolphins: Boycotts, trade sanctions, and unobservable technology. International Economic Review, 50(3), 883–902.

Peck, J. (2017). Temporary boycotts as self-fulfilling disruptions of markets. Journal of Economic Theory, 169, 1–12.