Competition and Misconduct
91 Pages Posted: 2 Oct 2018 Last revised: 27 Apr 2022
There are 3 versions of this paper
Competition and Misconduct
The I.O. Of Ethics and Cheating When Consumers Do Not Have Rational Expectations
Competition and Misconduct
Date Written: April 27, 2022
Abstract
Misconduct is widespread; practices such as mis-selling, pump&dump, and money laundering cause harm while raising profits. This paper presents a mechanism which can determine what sorts of misconduct can be sustained in competitive equilibrium in concentrated markets, oligopoly settings, and in markets with many small competing firms. The model studied allows general demand and makes a distinction in types of ethical dilemma using current psychological understanding. The paper shows, for example, that markets with many small competing firms are not vulnerable to misconduct if firms respond to entry with niche strategies or if the ethical dilemma draws an emotional response.
JEL Classification: L13, L20, G40
Suggested Citation: Suggested Citation