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Believing in Corporate Social Responsibility: An Indirect Evolutionary Analysis

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  • Werner Güth
  • Oliver Kirchkamp

Abstract

On a global market firms are randomly paired to engage in duopolistic competition based on conjectural payoffs, possibly different from true profits. Evolutionary fitness follows true profits. Competitors have beliefs about how competitor's price and own corporate social responsibility (CSR) expenditures determine own demand. In the tradition of indirect evolution, specifically evolution of preferences, we first solve all possible duopoly markets, based on commonly known payoff conjectures. We then derive evolutionarily stable conjectures. Believing that CSR expenditures enhance demand is evolutionarily stable only when this is true. In contrast, evolutionarily stable beliefs concerning price interdependence usually differ from actual price interdependence.

Suggested Citation

  • Werner Güth & Oliver Kirchkamp, 2021. "Believing in Corporate Social Responsibility: An Indirect Evolutionary Analysis," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 177(2), pages 167-177.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2021-0005
    DOI: 10.1628/jite-2021-0005
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    Keywords

    corporate social responsibility; indirect evolution;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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