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Understanding markets with socially responsible consumers

  • 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 non-trivially 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.

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Metadaten
Verfasserangaben:Marc KaufmannORCiDGND, Peter AndreORCiDGND, Botond KőszegiORCiDGND
URN:urn:nbn:de:hebis:30:3-715471
URL:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4671808
DOI:https://doi.org/10.2139/ssrn.4671808
Schriftenreihe (Bandnummer):SAFE working paper (411)
Verlag:SAFE
Verlagsort:Frankfurt am Main
Dokumentart:Arbeitspapier
Sprache:Englisch
Jahr der Fertigstellung:2023
Jahr der Erstveröffentlichung:2023
Veröffentlichende Institution:Universitätsbibliothek Johann Christian Senckenberg
Datum der Freischaltung:15.01.2024
Freies Schlagwort / Tag:caps; climate change; competitive equilibrium; externalities; regulation; social preferences; socially responsible consumers; taxes
Auflage:December 8, 2023
Seitenzahl:113
Bemerkung:
Support by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) through CRC TR 224 (Project A01) is gratefully acknowledged. We also gratefully acknowledge research support from the Leibniz Institute for Financial Research SAFE.
HeBIS-PPN:515424668
Institute:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
DDC-Klassifikation:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Klassifikation:D Microeconomics / D0 General / D01 Microeconomic Behavior: Underlying Principles
D Microeconomics / D1 Household Behavior and Family Economics / D11 Consumer Economics: Theory
D Microeconomics / D5 General Equilibrium and Disequilibrium / D50 General
D Microeconomics / D6 Welfare Economics / D62 Externalities
D Microeconomics / D6 Welfare Economics / D64 Altruism
D Microeconomics / D9 Intertemporal Choice and Growth / D91 Intertemporal Consumer Choice; Life Cycle Models and Saving
Sammlungen:Universitätspublikationen
Lizenz (Deutsch):License LogoDeutsches Urheberrecht