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Sustainability of profit and corporate social responsibility: Mathematical modelingwith phase diagram

Author

Listed:
  • Tatcha Sudtasan

    (Chiang Mai University)

  • Komsan Suriya

    (Chiang Mai University)

Abstract

Business in modern world targets both profit and social responsibility. In the trading-off between making profits and spending for social responsibility, a firm needs to balance these two goals and maintain them in the long-run. Sustainable profit will prevent the firm to fall into the decaying stage of the product life cycle. Sustainable social responsibility will ensure that the business consistently contributes social benefits. This study develops a mathematical model using phase diagram to find a steady state and stable path for a firm to achieve the sustainability of both profit and social responsibility at the same time. It indicates four areas that are crucial to the operation and performance of the firm. They consist of warm glow area, frozen area, charitable area and decayed area. Major results indicate that a firm cannot automatically achieve both sustainable profit and social responsibility at the same time. It needs policy manipulation and well-planned adjustment to move the business to the twin sustainability. Without manipulation, a firm located in warm glow area is expected to achieve only sustainable profit but it cannot easily stop spending for social responsibility. A firm located in frozen area can achieve only sustainable profit too but it has to shrink its social responsibility. The society will enjoy a firm located in charitable area when it spends too much for social responsibility and face the risk of bankruptcy. When the firm is located in the decayed area, it will face the downfalls of both the profit and expenditure for social responsibility.

Suggested Citation

  • Tatcha Sudtasan & Komsan Suriya, 2013. "Sustainability of profit and corporate social responsibility: Mathematical modelingwith phase diagram," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 2(4), pages 1-12, December.
  • Handle: RePEc:chi:journl:v:2:y:2013:i:4:p:1-12
    as

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    References listed on IDEAS

    as
    1. Komsan Suriya, 2012. "Modeling the linkage between tourism and multiple dimensions of poverty in Thailand," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 1(1), pages 17-38, March.
    2. Komsan Suriya & Carola Gruen, 2012. "Souvenir production in community-based tourism and poverty reduction in Thailand," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 1(1), pages 1-4, March.
    3. Jeeranan Techanan & Komsan Suriya, 2012. "Effect of income distribution on poverty reduction after the Millennium," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 1(4), pages 169-179, December.
    4. Suriya, Komsan, 2011. "Non-monotonic utility functions for microeconomic analysis of sufficiency economy," MPRA Paper 33783, University Library of Munich, Germany.
    5. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Komsan Suriya, 2014. "How to estimate the model of sustainable profit and corporate social responsibility," Business and Economic Horizons (BEH), Prague Development Center, vol. 9(4), pages 1-7, January.

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    More about this item

    Keywords

    Theory of the firm; mathematical modeling; phase diagram; sustainable development; corporate social responsibility.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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