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Can Collusion Promote Corporate Social Responsibility? Evidence from the Lab

Author

Listed:
  • Francisco Gomez Martinez

    (BI Norwegian Business School)

  • Sander Onderstal

    (University of Amsterdam)

  • Maarten Pieter Schinkel

    (University of Amsterdam)

Abstract

Competition has been argued to erode socially responsible behavior in markets, suggesting that allowing cartel agreements among firms may promote public interest objectives. We test this idea in a laboratory experiment. Participants playing the role of firms choose between offering a ÔfairÕ and an ÔunfairÕ good to a consumer participant. When the unfair good is traded, a negative externality is imposed on a third party. We vary whether or not the firms are allowed to coordinate on the type of good they sell Ð while remaining in price competing. We find that the opportunity to coordinate leads to more coordinated equilibria, but has no significant impact on the fraction of fair goods traded on the market. Instead it polarizes: more of the same good, fair or unfair, is offered in coordination. Irrespective of whether quality coordination between firms is allowed, participants are more likely to trade the fair good, the stronger their third-party preferences are. These findings suggest that both consumer and managerial values are more important drivers of socially responsible behavior than opportunities for firms to coordinate their corporate social responsibility (CSR) activities. We highlight implications for competition policy, where cartels may be exempted on CSR grounds.

Suggested Citation

  • Francisco Gomez Martinez & Sander Onderstal & Maarten Pieter Schinkel, 2019. "Can Collusion Promote Corporate Social Responsibility? Evidence from the Lab," Tinbergen Institute Discussion Papers 19-034/VII, Tinbergen Institute, revised 12 Nov 2019.
  • Handle: RePEc:tin:wpaper:20190034
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    File URL: https://papers.tinbergen.nl/19034.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Budzinski, Oliver & Stöhr, Annika, 2023. "Wettbewerb und Nachhaltigkeit in Deutschland und der EU: Ökonomische Einschätzung der Studie im Auftrag des Bundesministeriums für Wirtschaft und Klimaschutz," Ilmenau Economics Discussion Papers 179, Ilmenau University of Technology, Institute of Economics.
    3. Maarten Pieter Schinkel & Leonard Treuren, 2021. "Corporate Social Responsibility by Joint Agreement," Tinbergen Institute Discussion Papers 21-063/VII, Tinbergen Institute.
    4. Drouvelis, Michalis & Gomez-Martinez, Francisco, 2023. "The impact of group identity on experimental markets with externalities," European Economic Review, Elsevier, vol. 158(C).

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    More about this item

    Keywords

    Collusion; Corporate social responsibility; Public interest; Laboratory experiment; Competition policy;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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