Believing in Corporate Social Responsibility: An Indirect Evolutionary Analysis

Werner Güth and Oliver Kirchkamp

Journal of Institutional and Theoretical Economics (JITE), 2021, vol. 177, issue 2, 167-177

Abstract: On a global market firms are randomly paired to engage in duopolistic competition based on conjectural payoffs, possibly different from true profits. Evolutionary fitness follows true profits. Competitors have beliefs about how competitor's price and own corporate social responsibility (CSR) expenditures determine own demand. In the tradition of indirect evolution, specifically evolution of preferences, we first solve all possible duopoly markets, based on commonly known payoff conjectures. We then derive evolutionarily stable conjectures. Believing that CSR expenditures enhance demand is evolutionarily stable only when this is true. In contrast, evolutionarily stable beliefs concerning price interdependence usually differ from actual price interdependence.

Keywords: corporate social responsibility; indirect evolution (search for similar items in EconPapers)
JEL-codes: C73 M14 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1628/jite-2021-0005

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