Balancing responsibilities and benefits in newsvendor orders

We consider three corporate social responsibility (CSR) schemes as objectives of the newsvendor models to explore their impacts on the order quantity, firm's profit, consumer surplus, and social welfare. Specifically, the socially responsible (S) scheme maximises the weighted sum of the firm's profit and social welfare, the Nash bargaining (B) scheme follows the notion of proportional fairness, and the Rawlsian fairness (R) scheme generalises the max-min fairness notion. We find that the order quantity increases with the firm's emphasis on social responsibility (i.e. CSR level) across all schemes. With a low profit margin, the S scheme consistently yields the highest order quantity; however, with a high profit margin, each scheme may yield the highest order quantity. Moreover, the performance in consumer surplus aligns with that in the order quantity. Second, while social welfare consistently increases with the CSR level under the S scheme, it initially increases and then decreases under the B and R schemes. Furthermore, the latter two schemes can result in lower social welfare than without CSR considerations. Finally, under the S scheme, a unit reduction in profit consistently increases consumer surplus by more than one unit, while the B and R schemes do not generate such a stable high efficiency.