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Linking Economic and Social-Exchange Games: From the Community Norm to CSR

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  • Masahiko Aoki

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    (Economics Department, Stanford University)

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    Abstract

    This paper proposes an approach to the roles of social norm dealing with economic externalities. Traditionally social norms are treated by economists as external constraints or endogenous outcomes of repeated economic transactions. In contrast, this paper formulates a game of social exchanges and characterizes the role of social norm in regulating a game of economic transactions as equilibrium of linked games. Advantage of this approach is manifold: it can clarify conditions for social norm to regulate economic externalities when endogenous reputation mechanisms fail as well as to facilitate, rather than deter, a change in economic institution. More specifically, it suggests a solution to the empirical paradox of why a corporate social responsibility program sometimes contributes to a firm's better stock market performance.

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    File URL: http://www-siepr.stanford.edu/repec/sip/07-018.pdf
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    Bibliographic Info

    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-018.

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    Date of creation: Oct 2007
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    Handle: RePEc:sip:dpaper:07-018

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    Related research

    Keywords: social norm; social capital; linked games; corporate social responsibility (CSR);

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    1. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    2. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
    3. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
    4. Ottati, Gabi Dei, 1994. "Trust, Interlinking Transactions and Credit in the Industrial District," Cambridge Journal of Economics, Oxford University Press, vol. 18(6), pages 529-46, December.
    5. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
    6. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, December.
    7. Craig L Infanger, 1993. "The Agrarian Origins of Commerce and Industry, A Study of Peasant Marketing in Indonesia," Comparative Economic Studies, Palgrave Macmillan, vol. 35(2), pages 60-62, July.
    8. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, September.
    9. Fabrizio Barca & Katsuhito Iwai & Ugo Pagano & Sandro Trento, 1998. "The Divergence of the Italian and Japanese Corporate Governance Models: The Role of Institutional Shocks," CIRJE F-Series CIRJE-F-32, CIRJE, Faculty of Economics, University of Tokyo.
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