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Corporate social responsibility, durable-goods and firm profitability

Listed author(s):
  • Gregory E. Goering

    (University of Alaska Economics, Fairbanks, AK, USA)

Registered author(s):

    Utilizing a two-period durable-goods framework, we show that in uncommitted sales markets a firm may earn higher profits as it increases its level of corporate social responsibility (CSR). We find that this occurs even though CSR has no direct impact other than increasing the durable-goods firm's manufacturing costs. We show that in sales markets, CSR may allow the firm to credibly commit itself to lower production in the future. This, in turn, can enhance their profits even though the CSR activities are costly and provide no direct demand or marketing benefit in our model. This is important because it provides another, hereto unexplored, strategic rationale for the willingness of profit-maximizing firms to undertake costly CSR activities. Copyright © 2010 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1508
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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 31 (2010)
    Issue (Month): 7 ()
    Pages: 489-496

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    Handle: RePEc:wly:mgtdec:v:31:y:2010:i:7:p:489-496
    DOI: 10.1002/mde.1508
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Bryan W Husted & David B Allen, 2006. "Corporate social responsibility in the multinational enterprise: strategic and institutional approaches," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 838-849, November.
    2. Aleix Calveras & Juan-JosÉ Ganuza & Gerard Llobet, 2007. "Regulation, Corporate Social Responsibility and Activism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 719-740, September.
    3. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    4. Gregory Goering & Michael Pippenger, 2002. "Durable Goods Monopoly and Forward Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 271-282.
    5. Baron, David P., 2001. "Private Politics," Research Papers 1689, Stanford University, Graduate School of Business.
    6. Susan Ariel Aaronson, 2010. "A Match Made in the Corporate and Public Interests: Marrying Voluntary CSR Initiatives and the WTO," Working Papers 2010-06, The George Washington University, Institute for International Economic Policy.
    7. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, September.
    8. Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 729-749.
    9. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    10. Goering, Gregory E., 2008. "Socially concerned firms and the provision of durable goods," Economic Modelling, Elsevier, vol. 25(3), pages 575-583, May.
    11. Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-294, March.
    12. Donald S. Siegel & Donald F. Vitaliano, 2007. "An Empirical Analysis of the Strategic Use of Corporate Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 773-792, September.
    13. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    14. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-1076, December.
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