Do Legal Standards Affect Ethical Concerns of Consumers?

Dirk Engelmann and Dorothea Kübler

No 3266, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In order to address the impact of regulation on ethical concerns of consumers, we study the effect of a minimum wage. In our experimental market, consumers have monopsony power, firms engage in Bertrand competition, and workers are passive recipients of a wage payment. Two treatments are employed, one with no minimum wage in the first part but with a minimum wage in the second part, and one treatment with a minimum wage at the outset that is abolished in the second part. In both treatments, wages decrease over time in the first part even though some consumers show an interest in fair wages. If a minimum wage is in place, wages decline even faster. Introducing a minimum wage in a mature market raises average wages, while abolishing it lowers them. We discuss the implications of our results, such as the crowding out of ethical behavior through legal regulation.

Keywords: fairness; crowding out; consumer behavior; minimum wage; experimental economics (search for similar items in EconPapers)
JEL-codes: C91 J88 K31 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-lab, nep-law, nep-mkt and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Do legal standards affect ethical concerns of consumers? (2022)
Working Paper: Do Legal Standards Affect Ethical Concerns of Consumers? (2020)
Working Paper: Do legal standards affect ethical concerns of consumers? (2008)
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