Building a reputation as a socially responsible firm

Aleix Calveras and Juan-José Ganuza

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Many of the attributes that make a good "socially responsible" are credence attributes that cannot be learned by consumers either through search or experience. Consumers aggregate information about them from several channels (media, advertisement, NGOs, etc.). Since these sources may send contradictory messages, the information available to consumers is noisy. In this paper we model such informational environment and show the positive relationship between the accuracy of the information transmitted to consumers and CSR. We also show that firms may be tempted to adding noise to the information channel (e.g., through lobbying of the media), which might reduce the supply of the credence attributes and even harm firms themselves. As a consequence, firms might find profitable, for instance by means of forming a partnership with an NGO, to commit to not manipulate the information. Finally, we also show that such self-commitment by firms is a strategic substitute of transparency regulation by the public sector.

Keywords: credence good; information asymmetry; corporate social responsibility; regulation (search for similar items in EconPapers)
JEL-codes: D72 H42 L51 M14 Q52 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-cta and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1421

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