In May 2024, the City of Tours and the SEPANT2 association accused a Tours-based company of dumping hydrocarbons into the Petite Gironde, a river not far from Tours. This case shows how insensitive companies can sometimes be to the harmful consequences of their actions. To demonstrate this, Vanessa Valéro, Professor of Business Analytics and Decision Science at IMT-BS, and her colleagues studied the importance of public discourse in markets.
Can public discourse influence the market behavior of buyers and sellers? Vanessa Valéro, Björn Bartling, Roberto A. Weber and Lan Yao investigate this question in a 4* paper to be published in the American Economic Review. The group of researchers attempts to show the extent to which public discourse can induce changes in the behavior of different market participants, namely organizations and consumers.
The case of Petite Gironde
In 2020, firefighters noticed hydrocarbons polluting the Petite Gironde (near Tours). They quickly drained the river and made their way to the culprit. It was a truck maintenance company along the river. As a result the city of Tours and SEPANT filed a lawsuit. The goal of the lawsuit is clear: to raise awareness among other companies so that this does not happen again. “We need to change the way companies think, so that employees and managers are sensitive to pollution. You’ll see us all the time on these cases, we’re bringing a civil action not only for prevention, but also to educate the courts,” explains SEPANT administrator Alain Blanchet in an interview with France 3 Région.
Discourse, Market Game and Methodology
Vanessa Valéro and her colleagues conclude that public discourse has a significant impact on the market. It helps to improve responsible corporate and consumer behavior. To establish these results, they conducted a so-called market game3. Participants are assigned a role based on the role they will play: buyer, seller, and third party4. The sellers can offer two products. One is cheap to produce but has negative consequences for third parties. The other is slightly more expensive to produce and buy, but generates no consequences. In addition, there are three experimental conditions designed to simulate as many different scenarios as possible. The first is called Veil, where subjects can talk before the market, but they don’t know their role. The second is called No Veil, in which subjects can discuss beforehand and they know their role before the market begins. Finally, the third, Exclusive, is identical to No Veil, except that the discussion channel is reserved for buyers and sellers, and third parties are subject only to the decisions of others – a situation that is very close to reality.
The important role of discourse
Researchers have uncovered some surprising facts. In the majority of cases, the market shares of the so-called “responsible” products are much higher than those of the others. In figures, these market shares ranged from 70% to 95%, depending on the condition set before the experiment. Even the Exclusive condition shows very good results, with twice the market share compared to the no-speech condition. These results clearly show that speech plays an important role for both companies and consumers. Even more surprisingly, discussion has a greater effect than money. In another study, researchers doubled the production resources of salespeople to encourage them to design more responsible products. Although positive, the results were less than those obtained here (cf. The Causal Effect of Income Growth on Consumer Social Responsibility, Vanessa Valéro, Roberto A. Werber, Björn Bartling, Lan Yao).
Discourse is therefore essential in the marketplace to change mentalities. But managers and customers are not necessarily aware of these aspects. Figures show that the market share of “responsible” products drops to 62% when the discourse is no longer maintained. The impact of the discourse is therefore significant and has a major and above all lasting positive effect.
Definitions
Note: These experiments do not take into account certain factors, in particular the nationality and income of the participants, which may affect the market share of responsible products. Also, the discourse may vary according to the institutions and companies that disseminate it.
1 Open dialog between all the parties involved in the exchange of study products, i.e. buyers, sellers and third parties
2 Société d’Etudes, de Protection et d’Aménagement de la Nature en Touraine (Society for the Study, Protection and Management of Nature in Touraine).
3 Market simulation to study price formation and the behavior of the various actors (buyers, sellers, etc.).
4 Outside the market, this person doesn’t buy anything, but only takes part in the public discourse. He represents the part of the population that suffers the negative consequences of the production and distribution of the product.
