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The Business of Business is Business: Why (Some) Firms Should Provide Public Goods when they Sell Private Goods

Author

Listed:
  • Chien-Yu Lai
  • Andreas Lange
  • John A. List
  • Michael K. Price

Abstract

This note links the commodity bundling literature with the literature on the private provision of public goods. We discuss the potential profitability of bundling strategies for both private firms and charitable organizations. Even in the absence of consumption complementarities, we show important cases when private and public goods should be bundled. For example, both a monopolist and a charity can profit from bundling the goods they provide. Linking sales to charitable contributions can also be beneficial for for-profit firms as it alleviates price-competition. Beyond providing a theoretical framework for understanding the incentive properties of bundling private and public goods, the study lends insights into the debate on the efficacy of corporate social responsibility.

Suggested Citation

  • Chien-Yu Lai & Andreas Lange & John A. List & Michael K. Price, 2017. "The Business of Business is Business: Why (Some) Firms Should Provide Public Goods when they Sell Private Goods," NBER Working Papers 23105, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23105
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    References listed on IDEAS

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    1. Besley, Timothy & Ghatak, Maitreesh, 2007. "Retailing public goods: The economics of corporate social responsibility," Journal of Public Economics, Elsevier, vol. 91(9), pages 1645-1663, September.
    2. McManus, Brian & Bennet, Richard, 2011. "The demand for products linked to public goods: Evidence from an online field experiment," Journal of Public Economics, Elsevier, vol. 95(5-6), pages 403-415, June.
    3. Paul Pecorino, 2016. "A Portion of Profits to Charity: Corporate Social Responsibility and Firm Profitability," Southern Economic Journal, Southern Economic Association, vol. 83(2), pages 380-398, October.
    4. Peter T. L. Popkowski Leszczyc & Michael H. Rothkopf (deceased), 2010. "Charitable Motives and Bidding in Charity Auctions," Management Science, INFORMS, vol. 56(3), pages 399-413, March.
    5. McManus, Brian & Bennet, Richard, 2011. "The demand for products linked to public goods: Evidence from an online field experiment," Journal of Public Economics, Elsevier, vol. 95(5), pages 403-415.
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • H4 - Public Economics - - Publicly Provided Goods
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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