A Portion of Profits to Charity: Corporate Social Responsibility and Firm Profitability

Paul Pecorino ()

Southern Economic Journal, 2016, vol. 83, issue 2, 380-398

Abstract: I develop a model in which a firm can choose to donate a portion of its profits to the provision of a public good. Consumers value this public good and are willing to pay a price premium to a firm which makes such a donation. When this price premium is sufficiently large, the firm can raise its net profits by pledging a portion of those profits to provision of the public good. This is more likely when the consumer's marginal valuation of contributions to the public good is high and when the firm (in the absence of donations) has a high ratio of fixed costs to operating profits. I also identify circumstances under which corporate social responsibility makes consumers worse off.

Date: 2016
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https://doi.org/10.1002/soej.12158

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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:83:y:2016:i:2:p:380-398

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