Corporate Apology for Environmental Damage

Ben Gilbert, Alexander James and Jason Shogren

No 2017-02, Working Papers from University of Alaska Anchorage, Department of Economics

Abstract: Apologies are a powerful way to restore trust and reduce punishment costs in bilateral settings. But what do we know about public apologies for large scale man-made disasters? Herein we report on results from an experiment with apologies in a multilateral setting: a firm-caused environmental disaster. Subjects read about an oil spill scenario, and learned whether the oil firm made a full apology, a partial apology, or no apology, and whether the firm had a good, bad, or no environmental reputation. A partial apology is one that fails to accept full material responsibility for damages, such as by shifting the blame to another party. We find that full apologies and better reputation reduce the demand for punishment. However, full apologies and reputation are substitutes, with reputation being significantly more important. Additionally, apologies do not reduce the demand for compensation and may increase it if the firm is clearly a bad actor, or if admission of guilt is the only information subjects have. Our results help explain corporate social responsibility investments and greenwashing, and why many public apologies over an environmental disaster are only partial apologies.

Keywords: apologies; environmental disaster; oil spill; cheap talk (search for similar items in EconPapers)
JEL-codes: L14 Q54 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-env and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Corporate apology for environmental damage (2018)
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