Naked greed does not maximize corporate profits. Customers do not have full information about product quality, so they must trust their suppliers. When a corporation like GlaxoSmithKline (GSK) gets caught cheating its customers ( by suppressing information about negative side effects of one of its drugs), the gain in extra profits from cheating on this one drug is surely more than offset by the loss in profits on all drugs (from the damage to GSK’s reputation as a trustworthy supplier).
Contrary to popular wisdom, the market doesn’t reward greed, it punishes it.
This is from Professor William Easterly at the NYU Development Research Institute
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