Good reputation as insurance: how reputation moderates fairness perceptions in the market

When facing a significant demand or supply shock, profit-maximising firms may decide to adopt unfair economic decisions such as extreme cost-cutting or profiteering. No query has been made so far on what factors might moderate people’s negative judgment of unfair actions in the market. Across two vignette studies (N=3,200), we experimentally examine whether a company’s corporate reputation gained from their CSR activities and a company representative’s personal reputation moderate economic action fairness appraisals. We find evidence that people overwhelmingly rate unfair economic decisions as socially unacceptable. However, people are significantly less harsh in their judgment of an unfair economic decision when the company or its leader has a wholesome reputation. By contrast, we find little overall evidence that having a bad reputation significantly worsens public disapproval of an unfair economic decision. Our results highlight the importance of good reputation in protecting firms against severe negative fairness judgments.