Coordinated Effects of Corporate Social Responsibility
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Coordinated Effects of Corporate Social Responsibility Mariana Cunha1
· Filipa Mota2
Received: 9 October 2019 / Revised: 4 June 2020 / Accepted: 9 June 2020 / © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper analyzes the coordinated effects of corporate social responsibility (CSR) in a setting where firms take into account in their objective function the consumer’s welfare in addition to their profits, produce differentiated products, and compete in quantities. We consider a symmetric case, where firms have the same level of CSR and an asymmetric case, where firms have different levels of CSR. Our results confirm that assigning a positive weight to consumer surplus makes collusion harder to sustain, as shown in the literature. However, for a sufficiently high level of CSR, collusion sustainability is actually increasing in the degree of product substitutability when firms are CSR-symmetric. When firms are CSR-asymmetric, collusion sustainability is increasing in the degree of product differentiation if products are complements. Furthermore, we show that collusion may be welfare-improving when firms adopt a socially responsible behavior, which provides an interesting background to competition authorities when analysing cartel cases. Keywords Collusion · Corporate social responsibility · Product differentiation JEL Classification D42 · D43 · L41 · M14
1 Introduction Over the past decades, firms have been voluntarily adopting social and environmental concerns in their business operations and in their interactions with stakeholders (European Commission 2011). Corporate social responsibility (henceforth CSR) has become a major concern for a large number of firms in several industries, working as a source of market Mariana Cunha
[email protected]. Filipa Mota [email protected]. 1
Cat´olica Porto Business School, Universidade Cat´olica Portuguesa, Rua Diogo Botelho, 1327, 4169-005, Porto, Portugal
2
Faculdade de Economia, CEF.UP and Cat´olica Porto Business School, Universidade do Porto and Universidade Cat´olica Portuguesa, Rua Dr. Roberto Frias, Porto 4200-464, Portugal
Journal of Industry, Competition & Trade
competitiveness. According to the KPMG Survey of Corporate Responsibility Reporting (2017), more than 75% of the world’s 250 largest firms now include some “non-financial” information in their annual reports, since they believe CSR data is relevant to their investors, and this trend continues to grow (KPMG 2017). In the 2011 Communication on Corporate Social Responsibility, the European Commission defined CSR as “the responsibility of enterprises toward their impact on society” (EC 2011, p. 6). Scholars have been devoting their attention to this topic as well (e.g., Baron (2001), Goering (2007), B´enabou and Tirole (2010), Lambertini and Tampieri (2010), Kopel and Brand (2012), Fanti and Buccella (2017a), Fanti and Buccella (2017b), Fanti and Buccella (2017c), and Fanti and Buccella (2018), among others). Pressures to engage in CSR arise from different stake
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