slugExternalities and Ethical Buying Decision
Journal Title: International Journal of Academic Research in Management - Year 2014, Vol 3, Issue 3
Abstract
Under the condition of perfect competition with the information flow is free and available to all parties in the business, externality is considered as one of the market failure causing Pareto inefficiency due to inappropriate allocation of scare resources. In order to achieve Pareto efficiency, the general alternative is to impose Pigouvian Taxes or assign property right under Coase theorem. The other argument on this problem is from the view of the buyers or consumers. This paper is an explanatory study using a questionnaire survey with 5-point Likert’s scale to the college students in the Philippines. This research investigated whether ordinary consumer will support a company with negative externalities as well as explored the characteristics leading to the ethical buying decision. Based on the statistical analysis from the results of the study, the theories and propositions are supported that the consumer will not support a company with negative externalities. The buyer will make the ethical buying decision in the perfect market such that the demand for the producer with negative externalities will be low. The perfect market mechanism will adjust the externality’s problem naturally without the necessary application of Pigouvian taxes and Coase theorem.
Authors and Affiliations
Lok Tak Ming, Jafy
Keywords
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- EP ID EP17654
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