Publications
Publications
- Scandinavian Journal of Economics
Anger and Regulation
By: Rafael Di Tella and Juan Dubra
Abstract
We study a model in which agents experience anger when they see a firm that has displayed insufficient concern for the welfare of its clients (i.e., altruism) making high profits. Regulation can increase welfare, for example, through fines (even with no changes in prices). Besides the standard channel (i.e., efficiency), regulation affects welfare through two other channels. (i) Regulation calms down existing consumers, because a reduction in the profits of an unkind firm increases total welfare by reducing consumer anger. (ii) Individuals who were out of the market when they were angry in the unregulated market decide to purchase once the firm is regulated.
Keywords
Altruism; Populism; Public Relations; Profit; Consumer Behavior; Perception; Governing Rules, Regulations, and Reforms
Citation
Di Tella, Rafael, and Juan Dubra. "Anger and Regulation." Scandinavian Journal of Economics 116, no. 3 (July 2014): 734–765.