The aim of this literature-based bachelor thesis is not only to prove the existence of a willingness to pay for social responsibility, but also to highlight significant factors that influence individual behaviour. First, two decision-making concepts will be described. Afterwards, the willingness to pay for social responsibility will be analysed, comparing both the consumer perspective and the investor perspective. This procedure allows a greater understanding and comparison of human behaviour in different situations. Even though both perspectives will be discussed, the main focus of this thesis lies on the investor perspective. Therefore, the loyalty of socially responsable investors, the principles of investing and the influencing factors on investor’s SRI behaviour will be analysed in more detail.
Table of Contents
1. Introduction
2. Decision-making characteristics
3. Consumer perspective
4. Investor perspective
4.1 The loyalty of SRI investors
4.2 Principles of investing
4.3 Willingness-to-forgo for social responsibility
5. Conclusion
Research Objectives and Themes
This thesis examines the existence of a willingness-to-pay (WTP) for social responsibility among both consumers and investors, while highlighting the significant psychological and behavioral factors that influence these choices.
- Analysis of consumer decision-making processes regarding social responsibility
- Evaluation of the willingness-to-pay for socially responsible products
- Investigation of the loyalty and investment behavior of SRI (Socially Responsible Investing) investors
- Examination of the heterogeneity of investor motivations
- Role of information and decision-framing in investment behavior
Excerpt from the Book
Willingness-to-pay
Individuals’ willingness-to-pay (WTP) can be stated as the perceived benefit of a product. That means, only if the price equals or undercuts the perceived benefit the consumer is considering buying the product.4 The current state of research on consumer’s social responsibility supports the existence of this WTP for socially responsible goods. Different measurement-approaches pointed out, that some consumers are willing to pay a price premium in favour of consuming in a socially responsible way.
Bollen (2007) hypothesised that an investor “may view investing in an SR [socially responsible] fund as consuming the SR attribute.”5 Following this statement, it is of interest if investors show a similar behaviour compared to the consumer. Especially socially responsible investing (SRI) offers the opportunity to observe investors’ attitudes, preferences and concerns towards social responsibility. The World Economic Forum (2011) defines SRI “as an investment approach that integrates long-term environmental, social, and governance criteria into investment and ownership decision-making with the objective of generating superior risk-adjusted financial returns.”6 The integration of personal values and societal concerns with the investment decision is the key feature of SRI and most visibly via investing with social screens.7 SRI, also referred to as ethical investing, has originated in a religious context and was founded to match investors beliefs with their investment policies.8 For example, Islamic investors predominantly avoid investments in pork production, gambling and interest-based banking.9
The aim of this literature-based bachelor thesis is not only to prove the existence of a WTP for social responsibility, but also to highlight significant factors that influence individual behaviour.
Chapter Summary
1. Introduction: Introduces the growing importance of social responsibility and sets the research question regarding the willingness-to-pay for responsible company behavior.
2. Decision-making characteristics: Explains the consumer decision-making process and utility theory as foundational frameworks for understanding purchasing and investment behavior.
3. Consumer perspective: Summarizes research on how information about social responsibility and ethical features influences purchase intentions and actual willingness-to-pay.
4. Investor perspective: Analyzes the behavior of SRI investors, including their loyalty, the principles of responsible investing, and the motivations driving their willingness to forgo financial returns.
5. Conclusion: Synthesizes findings across both perspectives, noting the complexity of human behavior and the heterogeneity of investor segments regarding social responsibility.
Keywords
Willingness-to-pay, Social Responsibility, SRI, Corporate Social Responsibility, Consumer Behavior, Investment Behavior, Utility Theory, Ethical Investing, Decision-framing, Fairtrade, Investor Heterogeneity, Pro-social Attitudes, Financial Return, Risk-adjusted Return, Market Norms
Frequently Asked Questions
What is the core focus of this thesis?
The thesis explores whether individuals, both as consumers and investors, possess a "willingness-to-pay" (WTP) for social responsibility, meaning they are willing to accept lower financial returns or pay price premiums to support socially responsible initiatives.
What are the central thematic fields discussed?
The primary themes include consumer decision-making processes, the impact of ethical information on purchasing habits, the loyalty of SRI investors, and the influence of different "decision-frames" on investment outcomes.
What is the primary research goal?
The goal is to provide a comprehensive literature-based analysis proving the existence of a WTP for social responsibility and identifying the underlying factors that drive this individual behavior.
Which scientific methodology is utilized?
This is a literature-based thesis that analyzes and compares findings from a wide range of academic studies, including consumer focus groups, surveys, choice experiments, and field experiments.
What topics are covered in the main section?
The main section covers two distinct perspectives: the consumer perspective (purchasing behavior) and the investor perspective (SRI behavior, loyalty, and the heterogeneity of investors).
Which keywords characterize this work?
Key terms include Willingness-to-pay (WTP), Socially Responsible Investing (SRI), Consumer Behavior, Investment Behavior, Utility Theory, and the Attitude-behavior gap.
What is the "Attitude-behavior gap" in the context of this study?
It refers to the difference between what individuals claim to value in surveys (such as social responsibility) and their actual financial or purchasing behavior, often caused by the tendency to give socially desirable answers.
How does "decision-framing" affect SRI investment?
The research shows that how information is presented (e.g., as a financial choice or an expressive, moral choice) significantly alters the likelihood of an investor choosing a socially responsible investment fund.
Why is the heterogeneity of SRI investors significant?
Recognizing that SRI investors are not a uniform group—but vary from profit-driven to social-driven—is crucial for managers and financial advisors to effectively address different motivations within the market.
What did the analysis of "sin stocks" reveal?
Some studies indicated that sin stocks (e.g., gambling, tobacco) can outperform the market due to being undervalued by institutional investors, which highlights the financial cost some investors face when shunning these sectors.
- Quote paper
- Hendrik Overwien (Author), 2018, Is there a Willingness-to-pay for Social Responsibility?, Munich, GRIN Verlag, https://www.grin.com/document/1119495
