the impact of value-related crises on price and product-performance elasticities

Previous research on the impact of corporate crises on customers’ elasticity has largely focused on performance-related crises (e.g., product recalls) and found an increasing price elasticity under these conditions. we investigate whether this result differs for value-related crises that are due to ethical violations, such as the use of child labor or environmental pollution. in line with moral foundation theory (mft), we propose that value-related crises lead to stronger moral outrage and increased boycott intentions, thereby decreasing price and product-performance elasticities. we first analyze more than 360,000 facebook user comments in relation to four value-related and four performance-related crises and show that the different outcomes for value- and performance-related crises can be explained according to mft. then, through discrete choice experiments, we demonstrate that, in contrast to performance-related crises, price elasticity decreases substantially for a value-related crisis that affects both violating and nonviolating companies. we also show for the first time the impact on product-performance elasticities with similar negative effects as for price. the results are stable even for different product categories, causes of ethical violations, and measurement conditions. as a result, it is more difficult for companies to recover from value- than performance-related crises.