Corporate Social Responsibility and Firms Ability to Collude

We examine a duopoly with polluting production where firms adopt a form of corporate social responsibility (CSR) to define their objective functions. Our analysis focusses on the bearings of CSR on collusion over an infinite horizon, sustained by either grim trigger strategies or optimal punishments. Our results suggest that assigning a weight to consumer surplus has a pro-competitive e¤ect under both full and partial collusion. Conversely, a higher impact of productivity on pollution has an anti-competitive effect under partial collusion, while exerting no effect under full collusion. Under partial collusion, the analysis of the isoquant map of the cartel reveals that complementarity arises between the two weights.

Corporate Social Responsibility: Strategic Implications

We describe a variety of perspectives on corporate social responsibility (CSR), which we use to develop a framework for consideration of the strategic implications of CSR. Based on this framework, we propose an agenda for additional theoretical and empirical research on CSR. We then review the papers in this special issue and relate them to the proposed agenda.

Hybrid evolutionary oligopolies and the dynamics of corporate social responsibility

The diffusion of corporate social responsibility is investigated by employing a hybrid evolutionary game where a firm chooses between being either socially responsible, which implies devoting a fraction of its profit to social projects, or non-socially responsible. Consumers prize socially responsible companies by paying a higher reservation price for their products. The hybrid evolutionary framework is characterized by a quantity dynamics that describes the oligopolistic competition given firms’ belief about the composition of the industry. At regular intervals of time, this belief is endogenously updated by a retrospective comparison on the profits obtained and on the basis of an evolutionary mechanism. Assuming that firms are Nash players, that is at each instant of time they produce the Nash equilibrium-in-belief quantity, the investigation of the model reveals that an industry homogeneously populated by socially responsible firms is a stable equilibrium when the fraction of profits earmarked for socially responsible activities is sufficiently limited. However, the extra marginal profits of a socially responsible firm are reduced when the number of competitors increases, impeding the diffusion of socially responsible companies. In particular, the trade-off between a higher net margin on sales obtained by socially responsible firms and a lower level of production that reduces the profit gap between a socially responsible firm and the rest of the market shows that an increased size of the industry favors mixed oligopolies. Moreover, imposing the hypothesis of neutrality of CSR activities, the model reveals that being socially responsible is an evolutionarily stable strategy for firms and is convenient for customers. Relaxing the hypothesis of Nash players by introducing boundedly rational firms that decide their level of production according to a partial adjustment toward the best reply, the robustness of these results is confirmed

Dynamic behavior in a Cournot duopoly with social responsibility

In an oligopoly with isoelastic demand, the paper analyzes the quantity competition between NPM profit-maximizing firms and NRS socially responsible firms whose objective function is a linear combination of profit and consumer surplus. From the static analysis it follows that greater social responsibility has a competitive effect, since reduces the equilibrium price and increases the market share of socially responsible firms. In addition, it increases both the consumer surplus and total surplus. For the duopoly case, the dynamic study leads to the conclusion that, if at least one of the firms follows the gradient rule as an adjustment mechanism, an increase in the speed of adjustment is a source of instability. An increase in the value of the elasticity of demand as well as a reduction in the marginal cost has a stabilizing effect on the Cournot equilibrium. A higher level of social responsibility exerts a stabilizing role on the dynamics as long as demand is sufficiently elastic

An Empirical Analysis of the Strategic Use of Corporate Social Responsibility

Recent theories of the strategic use of corporate social responsibility (CSR) emphasize the role of information asymmetry and how CSR is likely to be matrixed into a firm's differentiation strategy. A key empirical implication of these theories is that firms selling experience or credence goods are more likely to be socially responsible than firms selling search goods. Using firm-level data, we report evidence that is consistent with this hypothesis.

Bargaining agenda in a unionised monopoly with network effects: when corporate social responsibility may be welfare-reducing

This paper investigates the bargaining agenda selection in a socially concerned unionised monopoly producing a network good. We show that the recently established result that under network effects the firm prefers sequential efficient bargaining may be reversed when there are social concerns. Thus, firm's social responsibility restores also in network industries the conventional result of the trade-union economics that the firm prefers right-to-manage (RTM). However, this may result rather paradoxical because RTM is always welfare-inferior and thus the higher the social responsibility is, the lower the social welfare outcome due to the agenda selection. As a consequence an increase of the firms' social concerns in network industries may reduce, through the channel of the unionised labour market, social welfare, in contrast with the common sense. This sheds some light on so far unexplored effects of the promotion of social responsibility activities by policy makers when also labour markets are taken into account

An experiment on energy-saving competition with socially responsible consumers: opening the black box

We present results from experimental price-setting oligopolies in which green firms undertake different levels of energy-saving investments motivated by public subsidies and demand-side advantages. We find that consumers reveal higher willingness to pay for greener sellers’ products. This observation in conjunction to the fact that greener sellers set higher prices is compatible with the use and interpretation of energy-saving behaviour as a differentiation strategy. However, sellers do not exploit the resulting advantage through sufficiently high price-cost margins, because they seem trapped into “run to stay still” competition. Regarding the use of public subsidies to energy-saving sellers we uncover an undesirable crowding-out effect of consumers’ intrinsic tendency to support green manufacturers. Namely, consumers may be less willing to support a green seller whose energy-saving strategy yields a direct financial benefit. Finally, we disentangle two alternative motivations for consumer’s attractions to pro-social firms; first, the self-interested recognition of the firm’s contribution to the public and private welfare and, second, the need to compensate a firm for the cost entailed in each pro-social action. Our results show the prevalence of the former over the latter

Market Equilibrium in the Presence of Green Consumers and Responsible Firms: A Comparative Statics Analysis

This paper analyzes how the interaction between green consumers and responsible firms affects the market equilibrium. The main result is that a higher responsibility by both producers and consumers can have different impacts on the efficiency of the firms’ abatement activity, depending on the nature of the cleaning costs. When the abatement costs are fixed, the efficiency of the clean-up effort is always increasing in their degree of responsibility. On the other hand, when the abatement costs are variable, a higher level of responsibility may reduce social welfare. Finally, the first best allocation is never reached, even in the presence of the highest credible level of responsibility of both consumers and producers.Green Consumers, Corporate Social Responsibility, Vertical Differentiation

Market Equilibrium in the Presence of Green Consumers and Responsible Firms: a Comparative Statics Analysis

This paper analyzes how the interaction between green consumers and responsible firms affects the market equilibrium. The main result is that a higher responsibility by both producers and consumers can have different impacts on the efficiency of the firms' abatement activity, depending on the nature of the cleaning costs. When the abatement costs are fixed, the efficiency of the clean-up effort is always increasing in their degree of responsibility. On the other hand, when the abatement costs are variable, a higher level of responsibility may reduce social welfare. Finally, the first best allocation is never reached, even in the presence of the highest credible level of responsibility of both consumers and producers.Green Consumers, Corporate Social Responsibility, Vertical Differentiation