Does it pay to be socially responsible? Evidence from Spanish retail banking sector
AbstractThis paper presents a theoretical and empirical analysis of strategic competition in retail banking when some of the financial firms are non-profit organisations that invest in social activities. Banking literature about competition is fairly large, but the strategic interaction between profit maximizing and non profit maximizers has not been extensively analysed except for Purroy and Salas (1999). In this paper, a completely different approach is taken. An adaptation of Hotelling’s two stage model of spatial competition is developed to take into account consumer perceptions respect to the two different types of financial institutions. The empirical analysis confirms that consumers take into account other features different from the price, such as social contribution or closer service to make a deposit or mortgage decision. These conclusions are of interest in the debate about a firm’s social or ethical activities. It is shown that if consumers value social activities, firms can improve their results by behaving socially responsible.
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Bibliographic InfoPaper provided by Department of Economics, University of Girona in its series Working Papers of the Department of Economics, University of Girona with number 16.
Date of creation: Jan 2006
Date of revision:
Strategic competition; Hotelling´s model; Spanish banking; Corporate social responsibility;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-29 (All new papers)
- NEP-FIN-2006-01-29 (Finance)
- NEP-FMK-2006-01-29 (Financial Markets)
- NEP-MIC-2006-01-29 (Microeconomics)
- NEP-MKT-2006-01-29 (Marketing)
- NEP-SOC-2006-01-29 (Social Norms & Social Capital)
- NEP-URE-2006-01-29 (Urban & Real Estate Economics)
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