Can Consumer Boycotts Backfire When Retailers Mediate Sales? The Case of Microbeaded Toothpaste

Résumé

A considerable literature has emerged on the effect of consumer boycotts as an instrument to change the behavior of private economic agents. In this paper, we examine retailer responses to a recent consumer boycott of "microbeads", small, polyethylene particles used in toothpaste, facewash, and other personal care products that are small enough to pass through sanitation systems and pose environmental risks to waterways. We examine the effect of a consumer boycott on microbeads over the period 2013-14 on microbeaded toothpaste sold by U.S. mass merchandisers using a quasi-experimental design. Our findings are that, relative to relative to non-beaded toothpaste products: (i) consumer demand for toothpaste containing microbeads decreased following the boycott; (ii) retailers responded to the boycott by reducing prices of microbeaded toothpaste and promoting them more frequently; and (iii) the equilibrium quantity of microbeaded toothpaste sold by retailers increased. We confirm economic intuition for this finding by examining changes in the dispersion of consumers’ valuations following the boycott. We find evidence that the consumer boycott reduced the dispersion of consumer valuations for microbeaded toothpaste, resulting in a counter-clockwise rotation of market demand, as consumers with high valuations for “green” product attributes exited the microbead segment of the market. Demand for microbeaded toothpaste became more price elastic in response, prompting retailers to narrow price-cost margins, which resulted in an increase in the equilibrium quantity of microbeaded toothpaste sold in the market.