The effect of environmental corporate social responsibility on a dynamic polluting oligopoly

Riku Watanabe ()
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Riku Watanabe: Graduate School of Economics, Osaka University

No 24-10, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study examines how corporate social responsibility (CSR) practices by oligopolistic firms impact pollution levels in a steady state. I develop a dynamic game model for polluting firms that adopt CSR. The analysis reveals that a firm’s CSR awareness drives its production strategy to align with the socially optimal level in both open-loop Nash equilibrium and Markov perfect Nash equilibrium. Achieving this social optimum is possible if firms are fully committed to CSR. The study explores two scenarios: excess pollution or underproduction, which depend on the pollutant’s impact on utility. Notably, when the pollutant’s damage to utility is significant, even a modest commitment to CSR can effectively reduce excessive pollution. These findings offer valuable insights for government policy, suggesting that stringent environmental regulations might be less necessary if firms are attentive to CSR.

Keywords: Corporate social responsibility; Pollution; Oligopoly; Differential games (search for similar items in EconPapers)
JEL-codes: H41 L13 Q20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2024-09
New Economics Papers: this item is included in nep-env, nep-gth, nep-ind and nep-upt
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