Pricing the Process: Consumer Preferences Toward Socially Beneficial Products

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2011
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Haverford College. Department of Economics
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eng
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Open Access
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Abstract
Socially oriented businesses are on the rise in the United States yet their social goals cause them to have higher costs and be less competitive. This paper investigates the viability of such a business model within a competitive market by determining the price premiums that consumers are willing to pay for goods manufactured or sold by social businesses. It begins with a review of past literature focusing on social certifications such as fair trade and forest stewardship. In contrast to such studies, this paper utilizes four categories based upon the B Corporation certification to shape a survey testing consumer price preferences. By determining that consumers are willing to pay premiums on social goods, as well as finding that these social premiums are similar in magnitude to the premiums placed on goods of higher quality, I find that a social certification, such as the B Corporation certification, can potentially add substantial value to a company. Also, through the incorporation of demographic information and a breakdown of price premium results into separate social categories, I find evidence of both significant differences in preferences between genders and that a higher perceived ability to consume may decrease consumers’ willingness to pay social premiums.
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