When More Competition May Damage Welfare with Socially Responsible Firms
Considering a Cournot monopoly/duopoly model with linear/quadratic production costs and Corporate Social Responsibility (CSR) activities, this note shows that, in contrast to the common view, entry may reduce social welfare. Moreover, we remark that the higher the CSR activities are, the more likely the welfare-damaging entry effect may occur, and the social welfare changes following a firm's entry crucially depend on the degree of convexity of the cost function. (original abstract)
- Baron, D.P. (2001), Private politics, corporate social responsibility, and integrated strategy, Journal of Economics and Management Strategy, 10, pp. 7-45.
- Baron, D.P. (2009), A positive theory of moral management, social pressure, and corporate social performance, Journal of Economics and Management Strategy, 18, pp. 7-43.
- Benabou, R., Tirole, J. (2010), Individual and Corporate Social Responsibility, Economica, 77, pp. 1-19.
- Bennett, J., Iossa, E., Legrenzi, G. (2003), The role of commercial non-profit organizations in the provision of public services, Oxford Review of Economic Policy, 19, pp. 335-347.
- Benz, M. (2005), Not for profit, but for satisfaction? Evidence on worker well-being in non-profit firms, Kyklos, 58, pp. 155-176.
- European Commission (2001), Promoting a European framework for corporate social responsibility, Green Paper, Office for Official Publications of the European Communities, Luxembourg.
- Fanti, L., Buccella, D. (2016), Network externalities and corporate social responsibility, Economics Bulletin, 36(4), pp. 2043-2050.
- Fanti, L., Buccella, D. (2017), The effects of Corporate Social Responsibility on entry, Economia e Politica Industriale - Journal of Industrial and Business Economics, 44(2), pp. 259-267.
- Fanti, L., Buccella, D. (2017), Corporate Social Responsibility in a game theoretic context, Economia e Politica Industriale - Journal of Industrial and Business Economics, 44(3), pp. 371-390.
- Forbes (2014), The Companies With The Best CSR Reputations. December 8, 2014. Available online at http://www.forbes.com/sites/kathryndill/2014/12/08/the-companies-with-the-best-csrreputations/.
- Frank, R. (2003), What Price the Moral High Ground? Ethical Dilemmas in Competitive Environments, Princeton-Oxford.
- Goering, G.E. (2007), The strategic use of managerial incentives in a non-profit firm mixed duopoly, Managerial and Decision Economics, 28, pp. 83-91.
- Goering, G.E. (2008), Welfare impacts of a non-profit firm in mixed commercial markets, Economic Systems, 32, pp. 326-334.
- Kitahara, M., Matsumura, T. (2006), Realized cost based subsidies for strategic R&D investments with ex-ante and ex-post asymmetries, Japanese Economic Review, 57 (3), pp. 438-448.
- Klemperer, P. (1988), Welfare effects of entry into markets with switching costs, Journal of Industrial Economics, 37 (2), pp. 159-165.
- Kopel, M., Brand, B. (2012), Socially responsible firms and endogenous choice of strategic incentives, Economic Modelling, 29, pp. 982-989.
- KPMG (2013), KPMG Survey of Corporate responsibility reporting 2013. Available online at https://assets.kpmg.com/content/dam/kpmg/pdf/2015/08/kpmg-survey-of-corporate-responsibility-reporting-2013.pdf.
- Jensen, M.C. (2001), Value maximization, stakeholder theory, and the corporate objective function, Journal of Applied Corporation Finance, 14 (3), pp. 8-21.
- Lahiri, S., Ono, Y. (1988), Helping minor firms reduce welfare, Economic Journal, 98, pp. 1199- 1202.
- Lahiri, S., Ono, Y. (1999), R&D subsidies under asymmetric duopoly: A note, Japanese Economic Review, 50, pp. 104-111.
- Lambertini, L. (2013), Oligopoly, the Environment and Natural Resources, London.
- Lambertini, L., Tampieri, A. (2012), Corporate social responsibility and firms' ability to collude, in: Boubaker, S. & Nguyen, D.K. (eds.), Board Directors and Corporate Social Responsibility, Palgrave Macmillan UK, pp. 167-178.
- Lambertini, L., Tampieri, A. (2015), Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly, Economic Modelling, 50, pp. 40-48.
- Lambertini, L., Palestini, A., Tampieri, A. (2016), CSR in an asymmetric duopoly with environmental externality, Southern Economic Journal, 83 (1), pp. 236-252.
- Manasakis, C., Mitrokostas E., Petrakis E. (2014), Strategic Corporate Social Responsibility activities and corporate governance in imperfectly competitive markets, Managerial and Decision Economics, 35, pp. 460-473.
- Mukerjee, A., Ray A. (2014), Entry, profit and welfare under asymmetric R&D costs, The Manchester School, 82, No. 3 June, pp. 284-295.
- Reputation Institute (2014), 2014 Global CSR RepTrak 100. Available online at http://www.re- putationinstitute.com/thought-leadership/complimentary-reports-2014.
- Schiff, J., Weisbrod, B. (1991), Competition between for-profit and nonprofit organizations in commercial markets, Annals of Public and Cooperative Economics, 62, pp. 619-639.
- Spitzeck, H., Hansen, E.G. (2010), Stakeholder governance: how stakeholders influence corporate decision making, Corporate Governance: The International Journal of Business in Society, 10 (4), pp. 378-391.