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Do Corporate Environmental Contributions Justify the Public Interest Defence?

Author

Listed:
  • Nigar Hashimzade
  • Gareth Donald Myles

Abstract

Corporations make significant direct contributions to environmental improvement and also indirect contributions, through expenditure on process and product innovation. We explore alternative motivations for these expenditures that look beyond the assertion that they are a consequence of business ethics. Two motives are explored: environmental improvement leading to reduced production costs, and publicized environmental expenditures boosting brand image. We analyze the equilibrium with environmental contributions and social welfare implications. These motives are then combined to determine whether environmental expenditures can justify public interest defence for the operation of a cartel. Using a variant of the Dixit-Stiglitz model we identify when reduced competition caused by a decrease in the number of active firms leads to greater environmental expenditures and higher welfare. However, allowing the operational firms to form a cartel and raise prices above Nash equilibrium levels always reduces environmental expenditures. Welfare falls, as a consequence, and the public interest defence fails.

Suggested Citation

  • Nigar Hashimzade & Gareth Donald Myles, 2017. "Do Corporate Environmental Contributions Justify the Public Interest Defence?," CESifo Working Paper Series 6755, CESifo.
    • Handle: RePEc:ces:ceswps:_6755
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    References listed on IDEAS

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    Cited by:

    1. Eric Langlais & Maxime Charreire, 2020. "Should environment be a concern for competition policy when firms face environmental liability ?," EconomiX Working Papers 2020-25, University of Paris Nanterre, EconomiX.
    2. Mariana Cunha & Filipa Mota, 2020. "Coordinated Effects of Corporate Social Responsibility," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 617-641, December.
    3. Maxime Charreire & Eric Langlais, 2021. "Should environment be a concern for competition policy when firms face environmental liability ?," Post-Print hal-03208691, HAL.
    4. Charreire, Maxime & Langlais, Eric, 2021. "Should environment be a concern for competition policy when firms face environmental liability?," International Review of Law and Economics, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    environment; public interest; cartel;
    All these keywords.

    JEL classification:

    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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