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Academic Pieces
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Written by Mark Longhurst
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Page 4 of 4
FINALLY, economist Mancur Olson contends that firms can increase consumers’ consumption of public goods by providing bundles of both private and public goods. Thus, companies like Honest Tea provide consumers with a high-quality private good, in the form of a tasty organic beverage, bundled with a public good- namely, support for environmentally sustainable produce and fair trade practices. In this case, Honest Tea bundles essentially the same group of public goods with 32 different varieties of beverages to appeal to a range of consumer tastes and preferences.
The success of Honest Tea indicates that at least some consumers are willing to pay a premium in order to compensate for unforeseen consequences of the production process. Other companies can learn valuable lessons from Honest Tea’s approach to marketing and convincing consumers to support ethically and environmentally responsible business models. Honest Tea, despite catering to an initially small market, has had a wide ripple effect on behavior of other firms by decreasing the cost, and thus increasing the demand, for sustainable inputs.
Reflecting on Honest Tea’s humble beginnings and recent success, Goldman notes that, “Sometimes even the most thoughtful consumers can forget how much power they possess.” As Goldman and Nalebuff have shown, the honest consumer may hold much more power than one might initially expect.
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