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Coordinated Effects of Corporate Social Responsibility

Mariana Cunha () and Filipa Mota ()
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Filipa Mota: Universidade do Porto and Universidade Católica Portuguesa

Journal of Industry, Competition and Trade, 2020, vol. 20, issue 4, No 1, 617-641

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: D42 D43 L41 M14 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10842-020-00344-2

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