A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition

Abstract

This paper models strategic interactions between non-identical duopolistic firms and a public interest / environmental organization (EO) that promotes "green" production practices by threatening consumer boycotts against "brown" producers. The paper describes when boycotts are deterred by prior firm commitments to be "green" and, alternately, when a boycott arises in equilibrium, despite symmetric information. When a boycott arises, it is either a small persistent boycott against the "small firm" in the industry, or a large transitory boycott against the "large firm" in the industry that prompts the target firm quickly to accede to the boycott demands.