Social Responsibility in Markets and Beyond

The research project Social Responsibility in Markets and Beyond is supported by the Oesterreichische Nationalbank (OeNB, the Austrian National Bank) under its Anniversary Fund (Jubiläumsfonds), project No. 19068. The project runs from 1 October 2025 to 30 September 2028.

Project members

  • Marc Kaufmann, principal investigator (PI), Central European University, Vienna
  • Botond Kőszegi, international collaboration partner, University of Bonn
  • Peter Ward-Griffin, postdoctoral researcher, Central European University, Vienna

Synopsis

As climate change and other environmental problems grow more pressing, more people try to reduce the harm their own behavior causes — as consumers, investors, workers, and voters. Standard economics struggles to explain this: a small actor is usually treated as a price taker with no impact, so caring about the greater good should not change how she behaves. Yet while a small consumer’s effect on prices does vanish, her effect on aggregate quantities — and hence on externalities — does not (Kaufmann et al., 2024), so a person who cares about that effect will take it into account.

Three theoretical strands build on this. One asks whether second-hand markets, often promoted as green, can instead undermine social responsibility by turning resale value into an effective subsidy for buying new goods. A second asks how far individual-level social responsibility can substitute for Pigouvian taxation — the classical but politically hard-to-implement remedy for externalities — by establishing the conditions under which competitive markets reach an efficient outcome when people act responsibly both as consumers and as investors. A third carries the framework beyond markets to settings such as social norms, where individuals may change their own behavior in order to shift the norm. Together, this work clarifies when decentralized individual action can complement, or even substitute for, the centralized policies that have proven so hard to enact — and thus when it can genuinely help address problems like climate change.

Working papers

  1. M. Kaufmann, M. Kornemann, and B. Kőszegi. Social Responsibility in Secondary Markets, 2025.

Background

The project builds directly on the published foundation

  • Kaufmann, Marc, Peter Andre, and Botond Kőszegi. “Understanding Markets with Socially Responsible Consumers.” The Quarterly Journal of Economics (2024). doi:10.1093/qje/qjae009

which develops the consumer side of this framework, and extends it to producers and investors, to dynamic and non-market settings, and to large-scale market experiments. Further working papers from the project will be added above as they become available.