Signaling Product Quality Information in Supply Chains via Corporate Social Responsibility Choices

Yuhui Li, Debing Ni, Zhuang Xiao and Xiaowo Tang
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Yuhui Li: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China
Debing Ni: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China
Zhuang Xiao: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China
Xiaowo Tang: School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, China

Sustainability, 2017, vol. 9, issue 11, 1-20

Abstract: This study focuses on how an upstream supplier signals the private information of its product quality with corporate social responsibility (CSR) choices to a downstream retailer and uninformed consumers in the final market. We build a signaling model to: capture the strategic interactions among the supplier, the retailer, and the final consumers in the supply chain; characterize completely the set of all separating perfect Bayesian equilibriums (PBEs); and finally, select a unique equilibrium that satisfies the intuitive criterion for exploring some comparative statics. The equilibrium results show that under some technical conditions: (1) a set of moderate levels of CSR conduct signal the upstream supplier’s high quality in the sense of separating PBEs; (2) the unique separating PBE satisfying the intuitive criterion is the one with the lowest CSR level that separates a high-quality supplier from a low-quality supplier; (3) the lowest CSR level decreases in the proportion of informed consumers and the low-quality supplier’s marginal CSR cost, but is independent of the high-quality supplier’s marginal CSR cost; (4) the profits of the high-quality supplier increase in proportion to the number of informed consumers and the low-quality supplier’s marginal cost CSR, but decrease in proportion to the high-quality supplier’s marginal CSR cost. Managerial insights are also discussed.

Keywords: corporate social responsibility; product quality; signaling game; supply chain (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:9:y:2017:i:11:p:2113-:d:119399

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