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Corporate social responsibility and strategic trade policy: an endogenous timing game and its policy implications

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  • Cho, Sumi
  • Lee, Sang-Ho
  • Hoang, Xoan

Abstract

This study incorporates the corporate social responsibility (CSR) initiatives of a domestic firm and analyzes strategic trade policy toward a foreign firm in a different market structure. We show that the tariff rate under a foreign (domestic) firm’s leadership is lowest when the degree of CSR is large (small). We also show that the foreign firm’s leadership yields the highest welfare when the degree of CSR is intermediate, while the domestic firm’s leadership yields the highest welfare otherwise. In an endogenous-timing game, we show that a simultaneous-move outcome is the unique equilibrium when the degree of CSR is small; thus, it is never socially desirable. We also show that the domestic firm’s leadership can be an equilibrium, which results in the highest welfare when the degree of CSR is large. Finally, when the degree of CSR is large, collusive behaviors between the domestic and foreign firms can increase welfare.

Suggested Citation

  • Cho, Sumi & Lee, Sang-Ho & Hoang, Xoan, 2019. "Corporate social responsibility and strategic trade policy: an endogenous timing game and its policy implications," MPRA Paper 95404, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:95404
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Luciano Fanti & Domenico Buccella, 2023. "Vertical industry and strategic trade policy," SN Business & Economics, Springer, vol. 3(2), pages 1-16, February.
    2. Lili Xu & Yidan Zhang & Sang‐Ho Lee, 2024. "Effects of partial passive ownership in a successive endogenous timing game with R&D spillovers," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 283-297, January.
    3. Xu, Lili & Lee, Sang-Ho, 2020. "Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration," MPRA Paper 100770, University Library of Munich, Germany.
    4. Sang-Ho Lee & Timur K. Muminov, 2021. "Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 505-525, December.
    5. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic Corporate Social Responsibility by a Multinational Firm and International Privatization Policies," MPRA Paper 105651, University Library of Munich, Germany.
    6. Junichi Haraguchi & Toshihiro Matsumura, 2021. "Profit‐enhancing entries in mixed oligopolies," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 33-55, July.
    7. Lili Xu & Fanrui Su & Sang-Ho Lee, 2023. "Strategic corporate social responsibility and partial privatization policy with foreign penetration," The Japanese Economic Review, Springer, vol. 74(2), pages 251-278, April.
    8. Arturo García & Mariel Leal & Sang‐Ho Lee, 2020. "Welfare‐improving cooperation with a consumer‐friendly multiproduct corporation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1144-1155, October.
    9. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications," MPRA Paper 108499, University Library of Munich, Germany.

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    More about this item

    Keywords

    corporate social responsibility; strategic trade policy; endogenous-timing game; simultaneous-move; sequential-move;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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