Understanding markets with socially responsible consumers

Arbeitspapier

Many consumers care about climate change and other externalities associated with their purchases. We analyze the behavior and market effects of such "socially responsible consumers" in three parts. First, we develop a flexible theoretical framework to study competitive equilibria with rational consequentialist consumers. In violation of price taking, equilibrium feedback nontrivially dampens a consumer's mitigation efforts, undermining responsible behavior. This leads to a new type of market failure, where even consumers who fully "internalize the externality" overconsume externality-generating goods. At the same time, socially responsible consumers change the relative effectiveness of taxes, caps, and other policies in lowering the externality. Second, since consumer beliefs about and preferences over dampening play a crucial role in our framework, we investigate them empirically via a tailored survey. Consistent with our model, consumers are predominantly consequentialist, and on average believe in dampening. Inconsistent with our model, however, many consumers fail to anticipate dampening. Third, therefore, we analyze how such "naive" consumers modify our theoretical conclusions. Naive consumers behave more responsibly than rational consumers in a single-good economy, but may behave less responsibly in a multi-good economy with cross-market spillovers. A mix of naive and rational consumers may yield the worst outcomes.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SAFE Working Paper ; No. 411

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Microeconomic Behavior: Underlying Principles ; Consumer Economics: Theory ; General Equilibrium and Disequilibrium: General ; Externalities ; Altruism; Philanthropy; Intergenerational Transfers ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Thema: socially responsible consumers ; social preferences ; climate change ; externalities ; competitive equilibrium ; regulation ; taxes ; caps

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kaufmann, Marc ; Andre, Peter ; Kîoszegi, Botond
• Ereignis: Veröffentlichung
• (wer): Leibniz Institute for Financial Research SAFE
• (wo): Frankfurt a. M.
• (wann): 2023

Weitere Informationen

• DOI: doi:10.2139/ssrn.4671808
• Handle: http://hdl.handle.net/10419/280964
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ