Article | Journal of Consumer Psychology | April 2018

Consumers Avoid Buying from Firms with Higher CEO-to-Worker Pay Ratios

by Bhavya Mohan, Tobias Schlager, Rohit Deshpandé and Michael I. Norton

Abstract

We document a novel driver of consumer behavior: pay ratio disclosure. Swiss corporation performance data gathered during a legally mandated pay ratio referendum reveals that salient high pay ratios are associated with decreased firm sales (Pilot Study). An incentive‐compatible field experiment shows that, when ratios are revealed, consumers avoid firms with high ratios relative to competitors (Study 1). Finally, the effect of high pay ratios also depends on consumers’ political ideology: Democrats and Independents show decreased purchase intentions for products sold by firms with high ratios, whereas Republicans are unaffected (Study 2).

Keywords: pay ratio; wage fairness; purchase intention; customers; Wages; Fairness; Consumer Behavior;

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Citation:

Mohan, Bhavya, Tobias Schlager, Rohit Deshpandé, and Michael I. Norton. "Consumers Avoid Buying from Firms with Higher CEO-to-Worker Pay Ratios." Special Issue on Marketplace Morality. Journal of Consumer Psychology 28, no. 2 (April 2018): 344–352.

About the Authors

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Rohit Deshpande
Sebastian S. Kresge Professor of Marketing
Marketing

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Michael I. Norton
Harold M. Brierley Professor of Business Administration
Director of Research
Marketing

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