Universität zu Köln

Pigors, Mark and Rockenbach, Bettina ORCID: 0000-0003-2624-1964 (2016). The competitive advantage of honesty. Eur. Econ. Rev., 89. S. 407 - 425. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1873-572X

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Abstract

We study competitive markets where firms may lie to their workers to reduce costs. Consumers may benefit from firms' dishonesty through lower market prices. Does firms' (dis-)honesty affect consumers' purchasing decisions? Our experiment shows that when honesty is fully transparent, it can provide a competitive advantage: Honest firms sell more and - despite higher costs - achieve higher profits. This finding is in line with our equilibrium predictions when allowing for dishonesty-averse consumers. By identifying circumstances in which consumers - although not the addressee of dishonesty - punish firms for their within-firm dishonesty, we contribute both to behavioral ethics and behavioral industrial organization. (C) 2016 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Pigors, Mark UNSPECIFIED UNSPECIFIED UNSPECIFIED Rockenbach, Bettina UNSPECIFIED orcid.org/0000-0003-2624-1964 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-259287
DOI:	10.1016/j.euroecorev.2016.09.001
Journal or Publication Title:	Eur. Econ. Rev.
Volume:	89
Page Range:	S. 407 - 425
Date:	2016
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1873-572X
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Professorship for Experimental and Behavioral Economics Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Reinhard Selten Institute
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language SOCIAL-RESPONSIBILITY; PROCEDURAL UTILITY; INCENTIVES; BEHAVIOR; MARKETS; IMAGE; GOODS Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/25928