The dynamics of socially responsible product differentiation and the habit formation of socially responsible consumers

In our model of socially responsible (SR) product differentiation two duopolists (a zero profit socially concerned producer and a profit maximizing producer) compete over prices and (costly) “socially and environmentally responsible” features of their products under a given law of motion of consumer’s habits. In a continuous time model in which the location of the zero profit socially responsible entrant is fixed and the profit maximizing producer (PMP) limits himself to price competition without SR imitation, we show that the optimal dynamic PMP’s price is always lower than his optimal static price since the PMP knows that, by leaving too much market share to his competitor, he will reinforce the habit of socially responsible consumption and loose further market share in the future. We also inspect the properties of equilibria when the PMP can imitate the entrant’s SR and we find that, in this case, the threshold triggering a PMP strategy of SR imitation and minimum price differentiation is higher in the dynamic than in the static case, depending on the PMP’s shadow cost of changes in consumer social responsibility.product differentiation, social responsibility, fair trade

Socially responsible business formation in Ukraine

The paper reviews development process of social responsibility of business in Ukraine during transition of its economy to market. Today social responsibility of business is understood by national entrepreneurs as marketing or PR-technology, this way it is limited to social events. In this interpretation the concept can not support stable development both at micro- and macro level and provide competitive edge for enterprises in the longer term. The author suggests possible scenarios for developing of social responsibility of business in the crisis.Social responsibility, business, formation, negative factors, trends, crisis., Labor and Human Capital, Public Economics, Ðœ14, Ð13,

Socially Responsible Investment in Japanese Pensions

As the level of retirement-related assets has grown, so too has public and private interest in so-called "Socially Responsible Investment" (SRI), an investment strategy that employs criteria other than the usual financial risk and return factors when selecting firms in which to invest. This study evaluates whether SRI indexes would alter portfolio risk and return patterns for the new defined contribution pension plans currently on offer in Japan. We conclude that SRI funds can be included as an option, albeit with some cost; consequently, mandatory investment in SRI portfolios cannot reasonably be justified.

Motives of Socially Responsible Business Conduct

The social and ecological challenges that governments face have raised their interest in socially responsible business conduct (SRBC). In this article we analyze the motives of executives to perform SRBC. We distinguish three types of motives: financial, ethical and altruistic motives. We test the hypotheses on a sample of 473 executives. The estimation results show that SRBC is driven by a combination of intrinsic and extrinsic motives, but that the intrinsic motives are stronger than the extrinsic motive.intrinsic motivation;extrinsic motivation;corporate social responsibility;socially responsible business conduct

Sovereign Bonds and Socially Responsible Investment

While the literature on Socially Responsible Investment (SRI) is mainly focused on the stock market, little attention has been paid to SRI in sovereign bonds. This paper investigates the effect of taking into account socially responsible indicators for countries, the Vigeo Sustainability Ratings (VSR), on the efficient frontier formed with the sovereign bonds of twenty developed countries. It shows that it is possible to increase the portfolios’ VSR rating without significantly harming the risk/return relationship. The analysis then focuses on specific ratings relating to a) the environment, b) social concerns, and c) public governance. The results suggest that socially responsible portfolios of sovereign bonds can be built without a significant diversification cost.Socially Responsible Investment, Sovereign Bonds, Portfolio Selection, Rating, Spanning Tests, Mean-variance efficiency, Portfolio Choice

TOWARDS MORE SOCIALLY RESPONSIBLE COCOA TRADE

Cocoa is a classic Third World cash crop. It is produced mostly by small, poor farmers in Africa, while its products - chocolate and sun tan oil - are consumed by rich consumers in North America and Europe. A few West African economies are highly dependent on foreign exchange earned from cocoa sales. It has therefore been targeted by Oxfam's Fair Trade initiative, and IITA's Sustainable Tree Crops Program (STCP) is launching an effort of become more aligned with consumer's social preferences. The most obvious dimension to addressing consumer demand for cocoa products is to insure provision of high quality products, which has become problematic since structural adjustment programs have dismantled the African parastatals governing cocoa production and exports. Cocoa production would also likely meet requirements for organic certification in many instances, but legitimately obtaining that certification would be costly. Cocoa also offers several dimensions through which consumers might, by their market choices, insure more socially responsible outcomes. Both the STCP and Fair Trade initiatives focus on the potential for poverty alleviation and on achieving sustainable development for poor African farmers. Those farmers are stewards of the rain forest, and their production decisions can determine whether cocoa remains a rain forest friendly crop, so global environmental impacts can also be influenced by cocoa markets. The most recent, most widely publicized, and most intractable issue to hit the cocoa market is the allegation that child labor may be used on those poor African cocoa farms. The first objective of this paper will be to describe this situation, and the problems of cocoa markets, focusing on what has been happening in Africa. Particular attention will be paid to the problems of implementing structural adjustment reforms, and the increasing role played by multi-national processors as they backward integrate into the African marketing systems. Then the Fair Trade and STCP initiatives will be described. Finally, a conceptual examination of marketing systems between the African cocoa farm and the chocolate manufacturer, emphasizing institutional arrangements, is used to assess the likely success of these initiatives in achieving their social goals.Institutional and Behavioral Economics, International Relations/Trade,

Socially Responsible Firms

In the corporate finance tradition starting with Berle & Means (1923), corporations should generally be run so as to maximize shareholder value. The agency view of corporate social responsibility (CSR) generally considers CSR as a managerial agency problem and a waste of corporate resources, since corporate insiders do good with other people’s money. We evaluate this agency view using large-scale datasets with global coverage (59 countries) on firm-level corporate engagement and compliance with respect to environmental, social, and governance issues. Using an instrumental variable approach, we document that CSR ratings are higher for companies with fewer agency problems (using standard proxies such as having lower levels of free cash flow and higher dividend payout and leverage ratios). Moreover, certain aspects of CSR (e.g., environmental, labor and social protection) are associated with increased executive pay-for-performance sensitivity and the maximization of shareholder value

Socially Responsible Investing

Purpose This study aims to answer the question, “Are people willing to forgo a portion of financial return for social good?” In other words, this study sought to report whether investors would be willing to accept less return, if the invested money could achieve a desired socially‐driven outcome. Methods An experiment was conducted at the Wharton Behavioral Lab, asking participants to make a tradeoff decision between lower paying and socially responsible option and higher paying and socially irresponsible option. Participants received payment based on their decisions. Results Fifty‐two people participated in the experiment over the course of three separate rounds. Findings can be organized into three points: 1.) Higher percentage of return results in the greater number of invested tokens; 2.) Women are more likely to allocate more tokens into the socially responsible option than men; and 3.) People behave differently according to the order of options presented. Conclusions Investors interested in socially responsible investing do not necessarily expect to sacrifice a portion of their gains. Thus, to encourage socially responsible investing, its returns should be comparable to returns for conventional investing