Do Legal Standards Affect Ethical Concerns of Consumers? An Experiment on Minimum Wages


Danz, David ; Engelmann, Dirk ; Kübler, Dorothea


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URL: https://ub-madoc.bib.uni-mannheim.de/30146
URN: urn:nbn:de:bsz:180-madoc-301466
Document Type: Working paper
Year of publication: 2012
The title of a journal, publication series: Working Paper Series
Volume: 12-03
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, Experimentelle Wirtschaftsforschung (Engelmann 2010-14)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Classification: JEL: C91 , J88 , K31,
Subject headings (SWD): Verbraucherverhalten , Moralisches Handeln , Mindestlohn , Experimentelle Spieltheorie
Keywords (English): Fairness , crowding out , consumer behavior , minimum wage , experimental economics
Abstract: To address the impact of regulation on ethical concerns of consumers, we study the example of minimum wages. In our experimental market, consumers have monopsony power, firms set prices and wages, and workers are passive recipients of a wage payment. We find that the consumers exhibit considerable fairness towards the workers by buying from the firm with the higher price and the higher wage. We also find that consumers have a tendency to split their demand equally between firms, which is a simple strategy to provide both workers with a minimal payoff. Introducing a minimum wage in a mature market raises average wages despite its significant crowding-out effects on consumers' fairness concerns. Abolishing a minimum wage crowds in consumers' fairness concerns, but crowding in is not sufficient to avoid overall negative effects on the workers' wages.

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Danz, David ; Engelmann, Dirk ; Kübler, Dorothea (2012) Do Legal Standards Affect Ethical Concerns of Consumers? An Experiment on Minimum Wages. Open Access Working Paper Series Mannheim 12-03 [Working paper]
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