Ethics and Illusions: How Ethical Declarations Shape Market Behavior

John Barrios, Jeremy Bertomeu, Radhika Lunawat and Ibrahima Sall

No 32385, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the impacts of ethical declarations on market transactions through a controlled laboratory experiment, where privately-informed sellers issue a public report prior to a first-price auction. We find that while signing an ethical statement does not reduce misreporting by sellers, it significantly increases buyer trust, often skewing the terms of the trade in favor of sellers. Contrary to rational expectations, buyers consistently struggle to undo the bias. In counterfactual scenarios, from our structural analysis, we find that price efficiency improves when buyers rationally process uncertainty about sellers' ethical preferences, yet bias persists even when buyers have more accurate perceptions of sellers'’ ethical standards. Overall, our results suggests that disclosure interventions aimed at enhancing ethical conduct in market settings may not necessarily lead to more efficient pricing or reduced bias, and in some instances, may even disadvantage certain market participants.

JEL-codes: D53 G10 G14 G4 G41 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth and nep-ind
Note: AP CF LE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32385.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32385

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32385
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().