Reputation Analytics by Daniel Diermeier;

Author:Daniel Diermeier;
Language: eng
Format: epub
Publisher: University of Chicago Press

Thus, if boycott decisions are made under incomplete information, a boycott attempt will be successful if switching costs are sufficiently low (c is small), if the target firm cannot afford a large drop in sales (k is low), or if the perceived social benefits of the boycott are substantial (b is high). These features have previously been identified as key factors of boycott success (Eesley and Lenox 2006; Friedman 1999; Lenox and Eesley 2009).

The uniqueness condition has another interpretation. Intuitively, it captures the case where, even if the benefit of unit b was a private good (not a public good as assumed in our model), it could be redistributed among the k participants needed for a successful boycott to compensate them for their participation cost c. Intuitively, the long-term savings due to lower product prices need to outweigh the short-term costs of participating in a boycott. Examples are boycotts with economic goals, such as the consumer boycotts against high grocery prices reported in Friedman (1999) or the 2011 Israeli cottage cheese boycott (Hendel, Lach, and Spiegel 2017).

This result may surprise readers familiar with Olson’s (1965) seminal work on collective action. Olson’s central thesis was that large groups are much less likely than small groups to solve the free-rider problem. Subsequent work, however, has challenged Olson’s thesis (e.g., Oliver 1993; Oliver and Marwell 1988). In her comprehensive survey of the literature, Oliver (1993, p. 275) concludes:

Put simply, in some situations the group size effect will be negative, and in others positive. You have to know the details of a particular situation before you can know how group size will affect the prospects for collective action.

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