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Rajiv Sethi: Store Stickers and Indiana’s Law – A Separating Equilibrium

Yves here. The intent of the “open for everyone” stickers is presumably to signal protest against the law. It’s telling that they appear to be springing up quickly in the face of a barrage of negative national press coverage as well as social media criticism.  Most retailers have thin margins, which means all things being equal, their margins are best served by not annoying possible shoppers. So one would assume rectitude on this issue would be the wisest commercial decision. Thus, aside from those owners who favor gay rights, the reaction also appears to signal where many store owners think their community’s opinion lies, as in fence sitting is more costly than saying they aren’t on the side of the new law (or what it might mean in a worst-case scenario). In other words, are we seeing that the heartlands are more liberal than the religious bloc (which punches above its weight politically due to its effectiveness in getting out the vote) would have the public believe?

By Rajiv Sethi, Professor of Economics, Barnard College, Columbia University. Cross posted from his blog.

In the wake of Indiana’s passage of the Religious Freedom and Restoration Act, the following stickers have started appearing on storefronts across the state:

open for service sticker

These signs allow business owners to signal their disapproval of the law, and if they spread sufficiently far and wide, will force those not displaying them to implicitly signal approval of the law. It’s worth reflecting on the consequences of this for customer choices, the profitability of firms, and the beliefs of individuals about the preferences of those with whom they occasionally interact.

At any given location, the meaning of the symbol will come to depend on the number and characteristics of the nearby firms displaying it. If all businesses were to paste the sticker alongside their Visa and Mastercard logos, it would be devoid of informational content and would not influence customer choices; this is what game theorists quaintly call a babbling equilibrium.

But it’s highly unlikely that such a situation would arise. Some owners will display the sign as a matter of principle, regardless of it’s effect on their bottom line, while others will adamantly refuse to do to even if profitability suffers as a result.

Between these extremes lies a large segment of firms for whom the choice involves a trade-off between profit and principle. They may disapprove of the law and yet abstain from taking a public position, or they may approve and cynically pretend to disapprove. What they choose will depend on the distribution of characteristics in their customer base, as well as the choices made by other firms.

In more liberal areas, such as college towns, those who display the stickers will likely profit from doing so, and owners concerned primarily with their profitability will be induced to join them. The meaning of the symbol will accordingly be diluted: some of those displaying it will be indifferent to the law or even mildly supportive. By the same token, the meaning of not displaying the symbol will be sharpened. Customers will sort themselves across businesses accordingly, with those opposed to the law actively avoiding businesses without stickers, thus reinforcing the effects on profitability and firm behavior.

In more conservative areas, those who display the stickers will likely experience a net loss of customers, and the meaning of the symbol will accordingly be quite different. Only those strongly opposed to the law will publicly exhibit their disapproval, and among those who abstain from displaying the stickers will be some who are privately opposed to the law. In this case customers opposed to the law will be less vigorous in seeking out businesses with stickers, again reinforcing the effects on profitability and firm behavior.

Just as customers will come to know more about the private preferences of business owners, the owners will come to know more about the customers they attract and retain. Furthermore, customers in a given store will come to know more about each other. Bars and bakeries will become a bit more like niche bookstores, and casual interactions will become a bit more segregated along ideological lines. None of these are intended consequences of the law, but they are some of its predictable effects, and it’s worth giving some thought to whether or not they are desirable.

I’ve heard it said that businesses in Indiana had the authority to deny service to some customers even prior to the passage of the new law, and that it therefore doesn’t involve any substantive change in rights. Even so, it’s a symbolic gesture that pins upon a group of people a badge of inferiority. Responding to this with a different set of symbols thus seems entirely appropriate.

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34 comments

  1. B. Examiner

    Religious*?! The Bible has a lot more to say about social justice and mercy than sex.

    Many Christian churches today are similar to the Pharisees of old, worshippers of money, despisers of everyone else and spiritually blind.

    *“Pure and undefiled religion in the sight of our God and Father is this: to visit orphans and widows in their distress, and to keep oneself unstained by the world.”

  2. Doug

    Thank for the excellent post exploring the display or nondisplay of this sticker at the retail level. Now, let’s explore the various permutations for wholesalers. What options do wholesalers have? What implications are there for choosing any of those options? How can/might retailers trump wholesaler options? Etc

  3. Steve H.

    Am odd phenomena of Facebook: the correlation between past posts about mindfulness and ‘which wolf you feed’, positively related to outrage about this (I live in Indiana, see ‘Puck Fence’ page).

    Equivalent to business walk-ins are ‘likes’, which I have not done, rather going with ‘Do not let your hearts be troubled.’ [Galadriel] But then a friend created ‘The Church of Steve’ which is taking off, and now I’m twisting in the wind…

    1. Steve H.

      To “clarify the intent” of this note [quote from Mike Pence]:

      The true mortal sin in Indiana is when something is ‘bad for bidness.’ Indianapolis was a degraded truck stop in the 1970’s. Tremendous amounts of work and money were invested to turn this around and make it a major, centrally located center for conventions, a safe place for tourists, with not only an NBA but an NFL team. The downtown area has a major theater festival, dozens of plays and hundreds of thousands of people.

      When the attempted ban on gay marraige was recently attempted, Cummins, an indigenous Indiana engineering company with over $17 billion in worldwide sales, was very clear they would have to leave Indiana if it passed, as they would not be able to retain critical personnel. The NCAA located its headquarters in Indianapolis, is holding the Final Four basketball tournament there, and felt the need to get ahead of the story, since it is going to take focus from the business at hand.

      Politically, the Dems allowed business in the state to be injured so the Reps could shoot themselves in the foot, while Pence showed his national aspirations (something not favored by the locals), but also showed he doesn’t have the spine to make a career catering to the fundamentalists. A ‘Church of Cannabis’ is already in the works, and I’m waiting for a naked sword-wielding follower of Odin to make a stand for his religious rights and get sent to Valhalla.

      Business in Indiana cannot allow this. The perverse consequence backlash is already in play, while the opportunists in and out of state smell blood in the water. Next weekend Indianapolis hosts one of the top sporting events on the planet, and any organizer worth their salt will be setting up protests in the street. Pence opened the door to an utterly disasterous weekend which could undo decades of work by very serious people, who only have one week to figure out how to salvage the situation.

      Hot times in Indiana, indeed.

      1. Jeremy Grimm

        I am mystified by your comments but just as convinced you know of what your speak. I lived in Indiana for a while and feel a strong affinity for the people I met and interacted with. “Back Home” still means something, actually means a great deal to me. I may not agree with where you are coming from but my affection for Indiana makes me anxious to hear more. I am a Californian, but I could not avoid a deep affection for Indiana and the people of the Midwest.

        1. Steve H.

          Well, the 7:07 comment was not a model of clarity. Your affinity and affection for the people here is not misplaced, and is a large part of why I expect to spend the rest of my life here. But there is a strong vein of intolerance, particularly in the southern part of the state. Martinsville was a major KKK stronghold, though there is little open activity today. I think only one state senator from the southern end voted against RFRA.

          Beyond that, politics here is just as grimy as anywhere. Gregory Travis: “The resulting confluence of elite knowledge (the kind you only get by making a career of skulking the hallways of INDOT and glad-handing every government bureaucrat you find), providential land ownership, and the brilliant coup-de-grace of getting the government to pay you to put a giant arterial road through your own land, resulted in what is best described as a perfect storm for the urban growth machine.” (www.bloomingtonalternative.com/articles/2004/06/27/7557)

          Despite this, day-to-day, people treat each other well. For a conservative state, there is a strong belief in the value of education, and Pence already had people up in arms statewide over his attempt to subvert the elected head of the Indiana Board of Education. She was elected after previous superintendent Tony Bennet was found to have violated the state ethics code, which voters took very seriously.

          Pence is no Richard Lugar, he looks good but I suspect his ambitions do not fit with a certain moral fiber in the state, and I wouldn’t count on his serving another term. The people I know just want to live a simple, good life, and this situation is ugly enough that he may just go away.

          1. Lyle

            Re Martinsville, Actually during the 1920s KKK boom Marion was a hotbed of the KKK as well. So because the 1920s KKK was as much against catholics and southern europeans as blacks, it makes sense as at least northern In did not have a lot of blacks at the time.

          2. Steve H.

            As this sinks in, with:

            “The American Federation of State, County and Municipal Employees (AFSCME) announced Monday they are pulling their 2015 Women’s Conference from the city in response to the legislation Governor Mike Pence signed into law last week. The conference was scheduled from October 9-11 at the JW Marriott.”

            and

            “Monday afternoon, the first concert cancellation was announced, when Wilco posted that they were canceling their May 7 show at Old National Centre.”

            it really hit me, about those very poor counties that depend on revenue sharing to provide basic services. And then I remembered

            “This happened to the Port Authority of New York and New Jersey, which saw interest rates jump from 4.3% to 20% in one week.”

            and realized that if Indiana bonds rates are based on future revenues which are based on past income, this could be devastating to the state in a way only equaled by the downfall of Gary. And since our previous governor was Mitch Daniels, who was W’s Director of OMB, why wouldn’t they be?

            I got no stomach for schadenfreude just now…

  4. BG

    A classic kerfuffle.
    1. The free market solution of these stickers is wonderful for business and most people will choose businesses that display thoese stickers ove businesses that do not.
    2. Not displaying that sticker willl be a sign that “not all are welcome here” and those businesses will suffer. Again a free market solution.
    3. Indiana is only one of 31 states with similarcommon or statutory laws http://www.theatlantic.com/politics/archive/2015/03/what-makes-indianas-religious-freedom-law-different/388997/.

    1. different clue

      Perhaps as news of that fact spreads the “this bussiness welcomes everyone” will spread to welcome-everyone bussinesses in those other states.

      1. Malmo

        99.9% of businesses welcome virtually everyone–yes, even gays. Please list the businesses that will not put out the welcome mat in Indiana? List the businesses in the other 19 states that have RFRA laws that have restricted business to gays or others? So far the only people withholding business to others are those folks like Angie’s List and Wilco, who are threatening a whole state. Talk about disproportionate hypocritical responses.

        1. cwaltz

          I guess someone should have told everyone to read the complete Bible instead of skimming past the parts that essentially when asked to choose between judgment and mercy to choose mercy and that if that was not your choice then you should be prepared to ALSO be judged without mercy.

          The words you reap what you sow spring to mind.

          For the record, if 99.9% of the businesses were opposed to this then perhaps these business owners should have considered this at election time. It isn’t like the GOP hasn’t been advertantly cherry picking the Bible for awhile to try to garner votes. You can’t tell me this law just came about in a vacuum and that all these business owners are gobsmacked that the guys who ran on marriage is between one man and one woman are shocked that this law was created. No, what they are shocked about is the fact that this law will impact their bottom line even though most of them could care less about the gay folk. Whoopsie!

  5. hunkerdown

    How adorable. If you don’t pledge allegiance to Markets, you must hate the “disadvantaged”, i.e. the fully-bought-and-paid-for alt-lifestyle bourgeoisie who has won nothing more than the right to mingle with soccer moms in modest jeans.

  6. Malmo

    What ill informed, sanctimonious BS. Nothing is new here. RFRA is law in some 19 states. There’s twenty odd years of case law behind RFRA too. Liberal hand waving on the Indiana law is simply disingenuous, anti religious bigotry. Would you have an African American be compelled to bake religious ceremonial cakes for a white supremacist? Should a Jew be compelled to be a photographer at a wedding ceremony for Nazi fascists? And Yves running on about the free market here deciding the phoney issue is completely hypocritical on her part. Talk about ginned up tempests in teapots. No wonder the left is the minority report in our politics.

    http://www.nationalreview.com/article/416160/indiana-protecting-discrimination-josh-blackman

      1. Malmo

        So what? Being gay is not a religion either. Compelling someone to engage in certain religious practices that violates one’s First Amendment right is a religious question. That most certainly would apply to the Jewish photographer above.

        1. sharonsj

          I rather doubt that Nazis would hire a Jewish photographer in the first place. And FYI, the Indiana law is different from similar laws; those similar laws specifically state the law cannot be used to discriminate. But for me the real question is who gets to decide what is a religion? The courts just turned down a guy who is a “sun-worshipping atheist” and said it wasn’t a religion. I believe in ancient astronauts, and so my religious beliefs are certainly atypical. If a court said this didn’t qualify as a religion, I’d tell them to go **** themselves. On the other hand, my religion doesn’t discriminate against non-believers.

        2. hunkerdown

          But American Exceptionalism *is* a religion, being as it is a situational syncretion of Calvinism, Humanism, schizophrenia and selective memory, and the National Review is one of its house organs. Yo Vladimir Vladimirovich, got any spare Chechens to pull a Charlie job on the National Review?

    1. PQS

      Read this for a fuller explanation of how and why this law is vastly different than the RFRA:

      http://m.theatlantic.com/politics/archive/2015/03/what-makes-indianas-religious-freedom-law-different/388997/?utm_source=SFTwitter

      Money quote:
      “…the Indiana statute explicitly recognizes that a for-profit corporation has “free exercise” rights matching those of individuals or churches. A lot of legal thinkers thought that idea was outlandish until last year’s decision in Burwell v. Hobby Lobby Stores, in which the Court’s five conservatives interpreted the federal RFRA to give some corporate employers a religious veto over their employees’ statutory right to contraceptive coverage.

      Second, the Indiana statute explicitly makes a business’s “free exercise” right a defense against a private lawsuit by another person, rather than simply against actions brought by government.”

      If you like giving business more power to get into your business, you’ll get behind this nonsense law written and pushed through by people who, religious arguments aside, are just people who are icked out by gays and want to be able to discriminate in the name of Jesus.

      1. Malmo

        From my link to counter yours:

        “…This brings us back to the Hoosier State. Section 9 of Indiana’s RFRA provides that “A person whose exercise of religion has been substantially burdened, or is likely to be substantially burdened, by a violation of this chapter may assert the violation or impending violation as a claim or defense in a judicial or administrative proceeding, regardless of whether the state or any other governmental entity is a party to the proceeding.” In the wake of Elane Photography, Indiana made explicit for its own law what the four federal courts of appeals and the Obama Justice Department had already recognized about the federal counterpart. Indiana’s RFRA does no more than codify that the private enforcement of public laws — such as discrimination claims — can be defended if there is a substantial burden on free exercise of religion. …That’s it. And again, until recently, this provision was not particularly controversial…I must stress — and this point has been totally lost in the Indiana debate — that RFRA does not provide immunity to discrimination claims. It only allows a defendant to raise a defense, which a finder of fact must consider, as in any other defense that can be raised under Title VII or the Americans with Disabilities Act.

        Read more at: http://www.nationalreview.com/article/416160/indiana-protecting-discrimination-josh-blackman

      2. afisher

        PQs, thanks for adding the link to clarify the whine: but other states do it to nonsense.

        It is that sort of nonsense that needs to be countered immediately. The Hate teh Gay will try and use that same bs. Pence tried that tactic and then quickly reverted to out and out lying.

  7. MikeW_CA

    “None of these are intended consequences of the law”… I sure would like to know what the intended consequences actually were. I have yet to hear a satisfying explanation.

    1. PQS

      To provide cover for so-called religious people with businesses to discriminate without fear of lawsuits.

      1. Malmo

        No it isn’t. There’s no slam dunk in this law. There is no immunity to discrimination claims. Read my above link to enlighten yourself.

          1. Malmo

            They sure do protect gays except where there is a compelling and or competing free exercise of religion conflict, which is very limited in application/scope.

            The people of Indiana are being tarred and feathered by a blood lusting liberal press over a ginned up non issue. The whole state is being discriminated against and damaged by the several self serving corporate entities who are grandstanding the issue and individuals pontificating on something they know little about. It’s a feeding frenzy rooted in propaganda and hate for primarily Christians, who for the vast majority thereof haven’t done a damn thing to harm gays, in private or in commerce.

            1. cwaltz

              Uh no they don’t. Sexual orientation and gender identity are NOT a protected class in Indiana. That’s why the governor couldn’t answer when he was on talk shows that gays wouldn’t be targeted by this legislation and why he specifically answered that he had no intention of making them a protected class. Duh.

            2. BEast

              If the Christians you speak of don’t wish to discriminate against LGBT people, then they should be against laws that let them discriminate against LGBT people.

              This reminds me of when the U.S. government tried to get Palau/Belau to pass a referendum allowing the U.S. military to use some 90+% of their island for military purposes. The U.S. said, “We won’t use that much, of course.” The Palauans’ response was pretty much, “Then why do you want us to say you can?” They voted no.

              I would add that since some 85% of Americans identify as Christian, claims that “Christians” are “hated” ring hollow.

  8. Jonf

    Justify this POS anyway you like that makes you feel brilliant, but it is a law written by bigots for bigots. It is time we moved past this sort of hatred. I, for one, support the boycott against these superior and most holy beings. Let them return to their home planet. They don’t belong here.

  9. Jeremy Grimm

    Being hetero, or being gay, is completely immaterial to any anything — as far as I’m concerned. My brother experienced gay discrimination when he tried to make equity in California theater and I do not tolerate or condone such gross discrimination. But if gays are not more discriminatory then other groups, I don’t understand or condone the discrimination against gays. I do get very pissed off when gays discriminate against me or my brother because we aren’t gay.

    1. BEast

      If you are equating one instance of (presumably illegal) discrimination against a straight man due to his straightness to centuries of legally enforced discrimination against LGBT people, not to mention widely socially-sanctioned hatred and violence against them, then you do not understand the issues here at all.

  10. Propertius

    I wonder if such signs are also common in Pennsylvania, Connecticut, Rhode Island, or Illinois?

  11. H. Alexander Ivey

    A few thoughts on this posting.

    “It’s worth reflecting on the consequences of this for customer choices, the profitability of firms, and the beliefs of individuals about the preferences of those with whom they occasionally interact.”
    First, the author is mixing two different POVs here, economic for the customer choices and profitability thoughts, and social with the beliefs of individuals thought… These are valid POVs but they are separate and not the same.

    His main paragraphs are a mainstream economist take on “business”. Unfortunately for those of us who like a dose of reality to ground our theories in, these paragraphs have nothing to do with how and why businesses “do what they do”. A much better start point is not the navel, but the actual business transactions that started the actions leading to this law. My source (my wife) stated it started with gay couples who, when they wanted to get married, tried to get catering, flowers, and reception rooms for their weddings. It seems that businesses turned them down because the business did not approve of gay marriage. (So, first off, businesses can and do decide to do, or not to do, business for purely social reasons only, not just economic ones.) Now, being Americans, the couples decided that businesses should not discriminate (withhold a service) due to the couple being gay. So there was a push to legally force the business to provide said service.

    Now, at this point, let me make it clear, the government has the right to limit or force a business to provide a good or service. That is not a point to be debated – so go away you “free market” people. But the question to be raised is: what limit should the government impose? Where is the line at which a business may deny a service to a person or group? This question, this point, is not debated, not discussed, not considered, so I won’t get into it either in this post.

    Back to the actual posting. The author goes off in a long winded, theorizing discourse on what are really social concerns, not economic ones, and mainly ignores the economic concern – that the main economic winner here is the maker of the sign or stickers.
    Within his discourse he displays the usual silly arguments – “In more liberal areas, such as college towns…”. Really, college towns are liberal? Not the ones I’ve been in, in the Deep South. And “In more conservative …will likely experience a net loss of customers…”. Um, got any evidence of that “fact”? Don’t think you do.

    Then the author passes into the current views on privacy (“Just as customers will come to know more about the private preferences of business owners, the owners will come to know more about the customers they attract and retain. …”) and then jumps into a questionable conclusion that casual interactions are ideological ones (what on earth is he talking about?). Then in his last paragraph, the author weasels out – I don’t know, I’m just a writer, I don’t know about Indiana law… Sorry. State your case. Is this law a valid limiting of a business or is it not? And for the record, a law is not a symbolic gesture. It is a political statement of will and power, complete with a force of procedure and people behind it.

  12. BEast

    I think a salient point that is left out that is that there already are LGBT-positive symbols that many retailers and restaurants already place in their windows, such as rainbow flags or pink triangle stickers. So businesses that actually welcome gay customers, and aren’t afraid to say so, could use those.

    (One might say that some straight business owners might be uncomfortable to display a rainbow flag, but why? Being worried that people might think you are gay is a subtle form of homophobia.)

    These new stickers seem like they’re for businesspeople opposed to the law, but moreover, opposed to losing business due to the law. I’m all for businesspeople saying, in effect, “We will put two grooms on a wedding cake,” as opposed to, “Adam and Eve, not Adam and Steve!”, but it seems a little wishy-washy to me.

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