The conventional wisdom, grounded in deontological ethics, is that retailers should extinguish unethical customer behavior. However, there exists an opposing teleological view that unethical behavior may be tolerated if its ultimate consequences are beneficial for all stakeholders. This is supported by a survey of retail managers conducted by the authors that revealed over 80% of the respondents are inclined to tolerate unethical customers whose actions have beneficial effects. The primary goal of this research is to investigate the boundaries of this teleological perspective, that is, whether ethical transgressions that appear to have negative short-term consequences for the retailer and other ethical customers can have beneficial longer-term consequences for all parties. We examine this question empirically with a longitudinal dataset, covering seventy weeks and over 48,000 accounts, from a popular Swiss online retailer. We focus on increased revenues and customer engagement as the benefit for the retailer. Our results show that customers registering multiple accounts in violation of the retailer’s policy comprise fewer than 11.5% of accounts, yet generate more than 27.6% of the retailer’s revenue. Specifically, their behavior leads to higher retailer revenues and greater engagement by other customers in the long-run. We discuss the implications of this insight for retailing managers as well as scholars.

Authors: Zhao Yang, René Algesheimer and Utpal M. Dholakia