Should Firms Care More About Their Own Customers or All Consumers?

This study compares two strategic approaches, Customer Orientation (CO) and Corporate Social Responsibility (CSR), within the Cournot competition framework, in which firms strategically determine output quantities. The central question is whether firms prefer to focus on their own customers only (CO) or expand their purview to include all consumers (CSR). To address this issue, the study constructs and analyzes a two-stage game with linear inverse demand in which two firms compete. In the first stage, each firm simultaneously selects the optimal level for its corporate culture, specifically regarding CO and CSR. In the second stage, each firm simultaneously determines its output level to maximize its objective function. The equilibrium analysis reveals that when the two firms are symmetric, they ultimately care only about their own customers, thereby favoring CO over CSR. This outcome underscores the strategic dominance of CO in a Cournot duopoly competition with linear inverse demand. This suggests that when firms make quantity-setting decisions, they prioritize direct customer relationships over broader social responsibility. The findings contribute to the literature on industrial organization and corporate strategy by clarifying how cultural orientation shapes competitive outcomes.