BazermanMoore

132 Chapter 7: Fairness and Ethics in Decision Making
can refrain from making the mistake of viewing ourselves or our advisors as immune
from the pernicious effects of conflicts of interest.
Indirectly Unethical Behavior
Imagine that a major pharmaceutical company is the sole marketer of a particular cancer
drug. The drug is not profitable, due to high fixed costs and a small market size, yet
the patients who do buy the drug are depending on it for their survival. The pharmaceutical
company currently produces the drug at a total cost of $5/pill and sells it for
only $3/pill. A price increase is unlikely to decrease use of the drug, but will impose
significant hardship on many users. How ethical would it be for the company to raise
the price of the drug from $3/pill to $9/pill?
Now imagine that, instead of raising the price, the company sold the rights to produce
the drug to a smaller, lesser-known pharmaceutical company. At a meeting between
the two companies, a young executive from the smaller firm was quoted as
saying: ‘‘Since our reputation is not as critical as yours, and we are not in the public’s
eye, we can raise the price fivefold to $15/pill.’’ Would selling the manufacturing and
marketing rights to the other firm be more or less ethical?
Paharia, Kassam, Greene, and Bazerman (2007) found that when evaluating each
of these two options individually, participants found it more unethical to raise the drug
price to $9 per pill than to sell off the product to another firm, knowing that the other
firm would raise the price to $15 per pill. When another group of participants was directly
asked to compare the two options, however, they found the behavior that led to a
$15-per-pill price to be more unethical. But as we discussed in Chapter 5, people typically
observe only one behavior at a time rather than comparing and contrasting two
options. Thus, as compared to simply raising the price of the drug, the sale of the drug
to the smaller company is a disguised, ambiguous price-raising tactic that is less likely to
raise concerns from the public—yet, at the same time, it may be more hazardous to the
drug’s users.
Could this type of indirect price increase happen in the real world? Yes—and, in
fact, some firms seem to specialize in creating such opportunities. In August 2005,
pharmaceutical manufacturer Merck, which had made a cancer drug called
Mustargen, sold the rights to manufacture and market the product to Ovation Pharmaceuticals,
a much smaller, less recognized company that specializes in buying slowselling
medicines from big pharmaceutical companies. Ovation soon raised the
wholesale price of Mustargen by roughly ten times, despite no investment in R&D or
any other significant new costs. As in the study described above, Merck might have
faced a public backlash if it had raised the price of the drug on its own. But because
Ovation is so small, it was able to raise the drug price without attracting much attention,
and Merck was able to avoid public accountability for effectively raising the price of the
drug tenfold.
Dana, Weber, and Kuang (2007) present intriguing evidence on this issue of camouflaging
the intentionality behind exploitative actions. Their study suggests that people
who carry out such ‘‘indirect unethical behavior’’ may do so as much to protect their
self-perceptions as to influence the perceptions of others. Participants in their study