We examine the impact of a carbon tax on consumer choices via a large-scale online randomized controlled trial. Higher taxes generally reduce the demand for high-carbon goods. Compared to an import tax, a carbon tax reduces demand when the tax is zero (i.e., announced but not levied) but leads to relatively higher demand for high-carbon goods when a positive tax is introduced. This difference in demand responses, despite identical prices, is concentrated among climate-concerned consumers. Our findings suggest that carbon taxes can crowd out the effect of climate concerns on consumer choices, with important implications for policy.
This study examines whether beginning farmers’ race and gender influence consumer support, measured through monetary contributions, voluntary effort, and willingness to pay for agricultural products. Using an incentivized online experiment with 1459 U.S. consumers, we exogenously manipulate the farmer’s race (White, Hispanic, and Black) and gender (male and female) on product labels. We do not detect statistically significant effects of race or gender across the three support outcomes. Overall, our findings indicate broadly similar levels of consumer support across the racial and gender groups studied, while not ruling out smaller or context-dependent forms of discrimination. These findings have implications for the economic viability of beginning farmers.
Before the Industrial Revolution, Northwestern Europe was characterized by late marriage under the European Marriage Pattern (EMP) and persistently high wages, two central features of the Little Divergence. Yet individuals following the EMP had fewer children, raising the question of how this norm could persist. We develop a cultural-transmission model to address this puzzle. Holding cultural composition fixed, higher wages raise fertility for both cultural types. Over time, however, sustained high wages increase the prevalence of the lower-fertility EMP type. This cultural-composition effect reduces average fertility and population pressure, thereby helping sustain high wages. The resulting feedback generates a weak-EMP/low-wage equilibrium and a strong-EMP/high-wage equilibrium. We further argue that regional differences in the severity of the Black Death shifted European societies between these equilibria. Regions with larger population losses experienced more persistent labor scarcity and high wages, allowing the EMP to spread and persist. The model therefore explains the joint persistence of late marriage and high wages in Northwestern Europe.
Using a survey and a pre-registered experiment, we provide evidence on the role of hype and social preferences on crypto investing. Our survey shows that crypto investors are more likely to be influenced by hype and exhibit lower social preferences. Our experiment helps us establish causal relationships: the hype treatment (i.e., information on the number of investors becoming millionaires daily through Bitcoin investing) increases the amount invested in crypto, with evidence consistent with higher expected returns playing a role, whereas the social treatments (i.e., information on crypto’s environmental impact and association with illegal activities) reduce the investment amount without altering financial expectations. Overall, our study helps to understand what encourages and hampers crypto investing.
This paper analyzes the effect of consumer sophistication on consumer assessment of social feedback (such as user reviews), and ultimately on a firm’s strategic decisions. Consumer sophistication is defined on a continuum of cognitive sophistication, with high levels corresponding to careful deliberation of available information and low levels corresponding to naive information processing. Consumers are aware that social feedback may be untrustworthy, and they tend to trust (distrust) positive (negative) feedback about a product for which they have a higher valuation. Optimal price, profit, and sales decrease (increase) with sophistication at low (high) levels of sophistication. Optimal sales, however, falls for a larger range of sophistication than price. At low levels of sophistication, the firm chooses to serve most consumers, and an increase in sophistication lowers the valuation of the marginal consumer, forcing the firm to cut prices. Marginal revenue also falls, lowering optimal sales. The dynamic reverses when sophistication is high, because an increase in sophistication increases the dispersion of consumer valuations. In an extension, we consider how the results change when consumers know that a firm aggressively suppresses negative feedback. Our results suggest that suppressing negative feedback harms the firm by nullifying the dispersion-enhancing effect of sophistication.
