Modern consumer behavior and ethical consumption

Abstract

This literature review examines consumer behavior in the ethical consumption framework. The objective is to find out if ethical consumption is rational in the economic framework through utility function modification. After establishing rationalities to ethical consumption, I move on to reasons for unethical consumption. I present asymmetric information as an obstacle for ethical consumption as well as cause for search costs to agents. Furthermore, I present irrational information processing as another reason for the avoidance of ethical consumption. When agents search and interpret the information they find in a biased way, they are called motivated Bayesians. This irrational information processing leads to self-deception in order for the agent to feel that she is acting morally correct while pursuing self-interest. For the problems that hinder ethical consumption, I present options to increase ethical consumption through both firm’s and consumer’s perspectives. These options include campaigning and advertising for firms and self-control and self-reflection for consumers.