Consuming Values

Abstract

We study the extent to which individuals' consumption decisions are influenced by firms' stances on controversial social issues and the implied incentives for firms to take such stances. We use transactions from a major payment card company to predict cardholders' likely social alignment with firm stances and to quantify effects on consumption. The social stances taken by firms increase revenue on average, with significant heterogeneity across consumers and firm stances. Consumers most aligned with a firm's social stance increase their consumption at the firm by 19 percent in the month following widely known social stance events, and consumers most opposed to the firm's stance decrease their consumption by 12 percent. These diverging consumption responses attenuate over time but persist even a year later. Firms tend to take stances that align with their consumers' and employees' social preferences and that correlate with the firm's ownership structure. Together, our results show that consumers meaningfully respond to their social alignment with firms, and that this consumer response can incentivize profit-maximizing firms to engage with social issues.