Article ID Journal Published Year Pages File Type
959233 Journal of Environmental Economics and Management 2012 15 Pages PDF
Abstract

We present a theory that explains the prevalence of consumer boycotts. In our model, a firm does not know how concerned consumers are about the firm's misconduct. Because it is only optimal for the firm to alter its behavior if consumers are very concerned, consumers have an incentive to overstate their concern by boycotting the firm. We show that free-riding problems do not preclude such boycotting. In fact, in each equilibrium boycotting occurs with positive probability and the firm always caters to the demands of those who boycott should boycotting ensue.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,