CONSUMER ACTIVISM, PRODUCER GROUPS, AND PRODUCTION STANDARDS

We examine competition between groups of producers when consumers pref er costly 'ethical' production technologies. Consumers are unable to i dentify or monitor production technologies. Producers can freeride on their group's 'reputation' by substituting cheaper 'unethical' technol ogies. When an ethical technology is Pareto-optimal, social pressures within competing producer groups can ensure long-run dominance of grou ps relying most heavily on the ethical technology. Even if social pres sures cannot support the choice of the ethical technology in the long run, competition between producer groups can increase the average leve l of adoption of the ethical technology for an arbitrarily long period of time.