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Endogenous Timing with a Socially Responsible Firm

Arturo García, Mariel Leal and Sang-Ho Lee ()
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Arturo García: Tecnológico de Monterrey, Campus Monterrey
Mariel Leal: Tecnológico de Monterrey, Campus Monterrey

Korean Economic Review, 2019, vol. 35, 345-370

Abstract: This study considers a duopoly model in which a socially responsible (SR) firm competes with a private firm by incorporating environmental externality and clean technology. We analyze the endogenous market structure where both firms strategically, sequentially, or simultaneously decide quantities, which also affect abatement activities. We reveal that depending on the relative concerns on environment and consumer surplus, the SR firm can be less or more aggressive in production and abatement, and it may earn high profits. Thus, not only the significance of externality but also the instrumental conflict of social concerns are crucial factors in determining the equilibrium of endogenous timing game. Finally, we indicate that unless the concern for externality is high, the simultaneous and sequential move game with SR firm leadership are socially desirable.

Keywords: Endogenous Timing; Socially Responsible Firm; Environmental Externality (search for similar items in EconPapers)
JEL-codes: L13 L31 Q5 (search for similar items in EconPapers)
Date: 2019
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