IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

On Fraud and Certification of Corporate Social Responsibility

  • Carmen Arguedas

    ()

  • Esther Blanco

    ()

We analyze the strategic decision of firms to voluntarily certify corporate social responsibility (CSR) practices in a context where other firms can falsely pretend to be socially responsible. Equilibrium outcomes are crucially determined by consumers' beliefs about the credibility of firms' CSR claims, which depend in turn on the (expected) fines for fraud. First, we show that an increase in such fines extends the likelihood of firms investing in CSR, at the expense of a reduced likelihood of certification. Second, fraud only arises when the fines for fraud are at intermediate levels and some CSR firms do not certify their practices. Third, the presence of fraud comes at a cost for firms by inducing lower equilibrium prices than in settings with honest marketing. Forth, the coexistence of fraud and certification induces differentiation price premia below marginal production costs and certification price premia above marginal certification costs. Lastly, social welfare rises as fines for fraud increase.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2014-18.pdf
Download Restriction: no

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2014-18.

as
in new window

Length: 54 pages
Date of creation: Jun 2014
Date of revision:
Handle: RePEc:inn:wpaper:2014-18
Contact details of provider: Postal: Universitätsstraße 15, A - 6020 Innsbruck
Phone: 0512/507-7151
Fax: 0512/507-2788
Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heyes, Anthony G. & Maxwell, John W., 2004. "Private vs. public regulation: political economy of the international environment," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 978-996, September.
  2. Matthew J. Kotchen, 2003. "Impure Public Goods and the Comparative Statics of Environmentally Friendly Consumption," Department of Economics Working Papers 2003-06, Department of Economics, Williams College.
  3. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
  4. Thomas P. Lyon & John W. Maxwell, 2007. "Corporate Social Responsibility and the Environment: A Theoretical Perspective," Working Papers 2007-16, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  5. Charles Mason, 2011. "Eco-Labeling and Market Equilibria with Noisy Certification Tests," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(4), pages 537-560, April.
  6. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
  7. Rick Harbaugh & John W. Maxwell & Beatrice Roussillon, 2011. "Label Confusion: The Groucho Effect of Uncertain Standards," Management Science, INFORMS, vol. 57(9), pages 1512-1527, February.
  8. Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05.
  9. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
  10. Thomas P. Lyon & John W. Maxwell, 2011. "Greenwash: Corporate Environmental Disclosure under Threat of Audit," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 3-41, 03.
  11. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
  12. Baron, David P., 2011. "Credence attributes, voluntary organizations, and social pressure," Journal of Public Economics, Elsevier, vol. 95(11), pages 1331-1338.
  13. Paul R. Portney, 2008. "The (Not So) New Corporate Social Responsibility: An Empirical Perspective," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 261-275, Summer.
  14. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  15. Soham Baksi & Pinaki Bose, 2007. "Credence Goods, Efficient Labelling Policies, and Regulatory Enforcement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(2), pages 411-430, June.
  16. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-55, April.
  17. Winand Emons, 1994. "Credence Goods and Fraudulent Experts," Diskussionsschriften dp9402, Universitaet Bern, Departement Volkswirtschaft.
  18. Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
  19. Timothy J. Feddersen & Thomas W. Gilligan, 2001. "Saints and Markets: Activists and the Supply of Credence Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 149-171, 03.
  20. Matthew J. Kotchen, 2013. "Voluntary- and Information-Based Approaches to Environmental Management: A Public Economics Perspective," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 276-295, July.
  21. Khanna, Madhu, 2001. " Non-mandatory Approaches to Environmental Protection," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 291-324, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:inn:wpaper:2014-18. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janette Walde)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.