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What you get is not what you paid for: New evidence from a lab experiment on negative externalities and information asymmetries
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Orientador(es)
Resumo(s)
In markets where ethical goods are available, consumers and producers can voluntarily address the negative
externality market failure. However, in reality, these goods are often credence goods and the claims are not
verifiable by consumers. We design an experiment to explore whether there can be voluntary internalization of
negative externalities in markets controlling for different types of information asymmetry, namely credence
claims with the potential for false advertisements, the possibility of certifying claims and finally mandatory
truthful claims. We observe that there is a limited scope for ethical goods to be traded and negative externalities
reduced in all informational setups. However, when false claims can be made, markets will appear very prosocial
to the outside observer who will see widespread concerns for externalities and a price premium on allegedly
ethical goods relative to conventional ones. In fact, conventional goods are just being falsely advertised as
ethical. In addition, the price premium is seldom enough to cover the additional cost of producing a good that
minimizes externalities. Even when credence claims are not allowed, the market will only partially internalize
negative externalities, leaving thus room for some form of regulatory intervention.
Descrição
Palavras-chave
Credence goods Negative externalities Ethical goods False ads Labels Economic experiment