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Socially concerned firms and the provision of durable goods

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  • Goering, Gregory E.

Abstract

A simple linear demand two-period durable goods is analyzed where the durable good is provided by a "socially responsible" or "socially concerned" firm (SCF). These firms typically have objectives other than pure profit maximization, such as consumer welfare. A flexible objective function is utilized that allows for both the "commercial" and "social concern" aspects of SCFs. The model indicates these firms will not typically provide the efficient cost-minimizing durability in sales markets. Indeed, if a SCF cannot credibly commit to its own customers or stakeholders, it will manufacture output with less durability than a pure for-profit seller. We show the firm's level of commitment ability and social concern with its stakeholders is crucial for determining the amount of "planned obsolescence" that prevails when SCFs manufacture durable goods. Indeed, the social concern commonly cited for the existence of SCF is a double edged sword since it may cause more product obsolescence as these types of firms move towards durable-goods provision. Interestingly, however, a private non-profit organizations (NPO) governance structure arguably provides an enhanced level of commitment with stakeholders vis-à-vis a SCF and thus we find that an NPO may well provide a more durable product than a SCF.

Suggested Citation

  • Goering, Gregory E., 2008. "Socially concerned firms and the provision of durable goods," Economic Modelling, Elsevier, vol. 25(3), pages 575-583, May.
  • Handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:575-583
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    References listed on IDEAS

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    Cited by:

    1. Lambertini, Luca & Tampieri, Alessandro, 2015. "Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly," Economic Modelling, Elsevier, vol. 50(C), pages 40-48.
    2. Goering, Gregory E., 2012. "Corporate social responsibility and marketing channel coordination," Research in Economics, Elsevier, vol. 66(2), pages 142-148.
    3. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.
    4. Vitor Miguel Ribeiro, 2014. "Public regulatory intervention in consumer-friendly firms," FEP Working Papers 548, Universidade do Porto, Faculdade de Economia do Porto.
    5. Nie, Pu-yan, 2013. "Duopoly quality commitment," Economic Modelling, Elsevier, vol. 33(C), pages 832-842.
    6. Kopel, Michael & Lamantia, Fabio & Szidarovszky, Ferenc, 2014. "Evolutionary competition in a mixed market with socially concerned firms," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 394-409.
    7. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    8. Lisa Planer-Friedrich & Marco Sahm, 2015. "Why Firms Should Care for all Consumers," CESifo Working Paper Series 5612, CESifo Group Munich.
    9. Kopel, Michael & Brand, Björn, 2012. "Socially responsible firms and endogenous choice of strategic incentives," Economic Modelling, Elsevier, vol. 29(3), pages 982-989.
    10. Pangburn, Michael S. & Stavrulaki, Euthemia, 2014. "Take back costs and product durability," European Journal of Operational Research, Elsevier, vol. 238(1), pages 175-184.
    11. Lisa Planer-Friedrich & Marco Sahm, 2017. "Strategic Corporate Social Responsibility," CESifo Working Paper Series 6506, CESifo Group Munich.
    12. Nakamura, Yasuhiko, 2014. "Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 105-117.
    13. Planer-Friedrich, Lisa & Sahm, Marco, 2016. "Why firms should care for all consumers," BERG Working Paper Series 116, Bamberg University, Bamberg Economic Research Group.
    14. Gregory E. Goering, 2010. "Corporate social responsibility, durable-goods and firm profitability," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(7), pages 489-496.
    15. Panda, Shibaji, 2014. "Coordination of a socially responsible supply chain using revenue sharing contract," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 67(C), pages 92-104.
    16. Planer-Friedrich, Lisa & Sahm, Marco, 2017. "Strategic corporate social responsibility," BERG Working Paper Series 124, Bamberg University, Bamberg Economic Research Group.
    17. Planer-Friedrich, Lisa & Sahm, Marco, 2017. "Why Firms Should Care for All Consumers," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168257, Verein für Socialpolitik / German Economic Association.

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