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Assessing Consumers’ Valuations of Socially Responsible Products with Controlled Experiments

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Environmentally Responsible Supply Chains

Part of the book series: Springer Series in Supply Chain Management ((SSSCM,volume 3))

Abstract

This chapter discusses the use of controlled experiments to study consumers’ valuations of socially responsible products. We review three common experimental methodologies: conjoint analysis, controlled laboratory experiments, and controlled field experiments. We contrast these methods with examples and highlight the strengths of each method. Despite the large literature on consumers’ valuations of social responsibility, few studies link consumers’ valuations with a company’s supply chain strategy. We present a recent study that fills this gap by utilizing a controlled laboratory experiment to investigate how the level of supply chain transparency may influence consumers’ valuations of a company’s social responsibility practices. We conclude by discussing a few interesting topics for future studies.

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Notes

  1. 1.

    We follow the European Commission’s definition of social responsibility as “[companies integrating] social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis” (Dahlsrud 2008). The definition of social responsibility and how it differs from sustainability is subject to debate (Montiel 2008). For our purposes, we position social responsibility as a subset of a company’s broader sustainability agenda.

  2. 2.

    The described approach for determining the players’ payoffs is known as the Becker-DeGroot-Marschak mechanism (Becker et al. 1964). It is a common technique in the experimental economics literature to elicit a truthful WTP (e.g., Klos et al. 2005; Halevy 2007).

  3. 3.

    More precisely, we study the preference of indirect reciprocity, defined as “the return from a social investment in another … from someone other than the recipient of the beneficence” (Alexander 1987, p. 5). In our design, a Consumer motivated by indirect reciprocity would be willing to reward the Firm for its responsible treatment of the Worker (e.g., ensuring a reasonable payoff).

  4. 4.

    We use the strategy method to obtain the Consumers’ WTP decisions for all effort levels (see, e.g., Fehr and Fischbacher 2004; Falk et al. 2008). That is, we ask each Consumer to state his/her WTP for each possible effort level while the Firm is choosing the actual effort. Note that the final payoffs are determined by the actual effort chosen by the Firm and the Consumer’s stated WTP corresponding to that effort.

  5. 5.

    All experimental results reported here are statistically significant. Please refer to Kraft et al. (2016) for more details of our statistical analysis.

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Acknowledgements

The authors are thankful to Atalay Atasu, Buket Avci, Beril Toktay, and the participants at the 2015 Sustainable Operations Workshop at Georgia Institute of Technology, Scheller College of Business, for their constructive feedback.

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Authors and Affiliations

  1. Massachusetts Institute of Technology, Cambridge, MA, 02139, USA

    Yanchong Zheng & León Valdés

  2. University of Virginia, Charlottesville, VA, 22903, USA

    Tim Kraft

Authors
  1. Yanchong Zheng
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  2. Tim Kraft
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  3. León Valdés
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Corresponding author

Correspondence to Yanchong Zheng .

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Editors and Affiliations

  1. Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia, USA

    Atalay Atasu

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Zheng, Y., Kraft, T., Valdés, L. (2016). Assessing Consumers’ Valuations of Socially Responsible Products with Controlled Experiments. In: Atasu, A. (eds) Environmentally Responsible Supply Chains. Springer Series in Supply Chain Management, vol 3. Springer, Cham. https://doi.org/10.1007/978-3-319-30094-8_3

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