Reputation as Insurance: How Reputation Moderates Public Backlash Following a Company's Decision to Profiteer

Danae Arroyos-Calvera and Nattavudh Powdthavee

No 15256, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine whether a company's corporate reputation gained from their CSR activities and a company leader's reputation, one that is unrelated to his or her business acumen, can impact economic action fairness appraisals. We provide experimental evidence that good corporate reputation causally buffers individuals' negative fairness judgment following the firm's decision to profiteer from an increase in the demand. Bad corporate reputation does not make the decision to profiteer as any less acceptable. However, there is evidence that individuals judge as more unfair an ill-reputed firm's decision to raise their product's price to protect against losses. Thus, our results highlight the importance of a good reputation in protecting a firm against severe negative judgments from making an economic decision that the public deems unfair.

Keywords: fairness; corporate reputation; CEO reputation; CSR; Halo effect (search for similar items in EconPapers)
JEL-codes: C90 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-04
New Economics Papers: this item is included in nep-bec and nep-exp
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Working Paper: Reputation as insurance: how reputation moderates public backlash following a company's decision to profiteer (2022)
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