Ethical Differentiation and Market Behavior : An Experimental Approach

We constructed triopolistic experimental markets where producers set prices. One producer's costs were higher than the others. In two experiments, costs were attributed to compliance with ethical guidelines. In the third, no justification was provided. Consumers paid premia for the ethically differentiated product and even larger premia if they did not know the producers' 'ethical' costs. Individual differences were important (students of business/economics paid smaller premia than others). We also provide evidence consistent with a large attitude-behavior gap for ethical consumption. Finally, we speculate about the observed 'demand function' for ethics and emphasize the potential of experimental methodology for understanding contextual effects in market settings