Anger and Regulation
نویسندگان
چکیده
We study a model where agents experience anger when they see a firm that has displayed insuffi cient concern for their clients’welfare (altruism) makes high profits. Regulation can increase welfare, for example, through fines (even with no changes in prices). Besides the standard channel (effi ciency), regulation affects welfare through 2 channels: (i) regulation calms down existing consumers because a reduction in the profits of an “unkind”firm increases total welfare by reducing consumer anger; and (ii) individuals who were out of the market when they were angry in the unregulated market, decide to purchase once the firm is regulated.
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