For corporations, social responsibility has become a big business. Companies spend billions of dollars doing good works—everything from boosting diversity in their ranks to developing eco-friendly technology—and then trumpeting those efforts to the public.

But does it pay off?

Many companies hope consumers will pay a premium for products made with higher ethical standards. But most companies plunge in without testing that assumption or some other crucial questions. Will buyers actually reward good corporate behavior by paying more for products—and will they punish irresponsible behavior by paying less? If so, how much? And just how far does a company really need to go to win people over?

To find out, we conducted a series of experiments. We showed consumers the same products—coffee and T-shirts—but told one group the items had been made using high ethical standards and another group that low standards had been used. A control group got no information.

In all of our tests, consumers were willing to pay a slight premium for the ethically made goods. But they went much further in the other direction: They would buy unethically made products only at a steep discount.

What’s more, consumer attitudes played a big part in shaping those results. People with high standards for corporate behavior rewarded the ethical companies with bigger premiums and punished the unethical ones with bigger discounts.

Finally, we discovered that companies don’t necessarily need to go all-out with social responsibility to win over consumers. If a company invests in even a small degree of ethical production, buyers will reward it just as much as a company that goes much further in its efforts.

Below, we’ll look at these tests in more detail. But first, a definition—and a caveat.

For our purposes, “ethically produced” goods are those manufactured under three conditions. First, the company is considered to have progressive stakeholder relations, such as a commitment to diversity in hiring and