The Socially Responsible Choice in a Duopolistic Market: a Dynamic Model of "Ethical Product" Differentiation
The increasing attention of profit maximising corporations to corporate social responsibility (CSR) is a new stylized fact of the contemporary economic environment. In our theoretical analysis we model CSR adoption as the optimal response of a profit maximising firm to the competition of a not for profit corporate pioneer in presence of a continuum of consumers with heterogeneous preferences toward the social and environmental features of the final good. CSR adoption implies a trade-off since, on the one side, it raises production costs but, on the other side, it leads to the accumulation of ethical capital. We investigate conditions under which the profit maximising firm switches from price to price and CSR competition by comparing monopoly and duopoly equilibria and their consequences on aggregate social responsibility and consumers welfare. Our findings provide a theoretical background for competition between profit maximising incumbents and not for profit entrants in markets such as fair trade, organic food, ethical banking and ethical finance.
|Date of creation:||29 Mar 2013|
|Date of revision:||29 Mar 2013|
|Contact details of provider:|| Postal: |
Web page: http://www.ceistorvergata.it
More information through EDIRC
|Order Information:|| Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma|
Web: http://www.ceistorvergata.it Email:
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.:
- Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 27-41, January.
- Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
- Bénabou, Roland & Tirole, Jean, 2009.
"Individual and Corporate Social Responsibility,"
TSE Working Papers
09-109, Toulouse School of Economics (TSE).
- Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
- Leonardo Becchetti & Giuseppina Gianfreda, 2007. "Contagious "Social Market Enterprises": The Role of Fair Traders," Rivista di Politica Economica, SIPI Spa, vol. 97(3), pages 51-84, May-June.
- 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, 09.
- David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
- Isabel GRILO, 1994. "Mixed Duopoly under Vertical Differenciation," Annales d'Economie et de Statistique, ENSAE, issue 33, pages 91-112.
- Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1991.
"Mixed oligopoly with differentiated products,"
International Journal of Industrial Organization,
Elsevier, vol. 9(1), pages 43-53, March.
- Giacomo Degli Antoni & Lorenzo Sacconi, 2011. "Does virtuous circle between social capital and CSR exist? A “network of games” model and some empirical evidence," Department of Economics Working Papers 1103, Department of Economics, University of Trento, Italia.
- Becchetti Leonardo & Giorgio Federico & Solferino Nazaria, 2011. "What to do in globalised economies if global governance is missing? The vicarious role of competition in social responsibility," International Review of Economics, Springer, vol. 58(2), pages 185-211, June.
- Leonardo Becchetti & Rocco Ciciretti & Alessandro Giovannelli, 2012.
"Corporate Social Responsibility and Earnings Forecasting Unbiasedness,"
CEIS Research Paper
233, Tor Vergata University, CEIS, revised 08 Feb 2013.
- Becchetti, Leonardo & Ciciretti, Rocco & Giovannelli, Alessandro, 2013. "Corporate social responsibility and earnings forecasting unbiasedness," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3654-3668.
- 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.
- Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2006. "Corporate Social Responsibility in Oligopoly," Working Papers 0707, University of Crete, Department of Economics, revised 15 Jan 2007.
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
- Leonardo Becchetti & Giorgio Federico & Nazaria Solferino, 2011. "Erratum to: What to do in globalised economies if global governance is missing? The vicarious role of competition in social responsibility," International Review of Economics, Springer, vol. 58(4), pages 439-439, December.
- Aurora García-Gallego & Nikolaos Georgantzís, 2009. "Market Effects of Changes in Consumers' Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 235-262, 03.
- Lorenzo Sacconi, 2012.
"The Economics of Corporate Social Responsibility,"
Econometica Working Papers
- Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
- Leonardo Becchetti & Stefano Castriota & Ermanno Tortia, 2013. "Productivity, wages and intrinsic motivations," Small Business Economics, Springer, vol. 41(2), pages 379-399, August.
- Giacomo Degli Antoni & Lorenzo Sacconi, 2011. "Does a virtuous circle between social capital and CSR exist? A Ònetwork of gamesÓ model and some empirical evidence," Econometica Working Papers wp28, Econometica.
- nada, BELHADJ & GABSZEWICZ, Jean J. & TAROLA, Ornella, 2013. "Social awareness and duopoly competition," CORE Discussion Papers 2013043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Linda A. Toolsema, 2009. "Interfirm and Intrafirm Switching Costs in a Vertical Differentiation Setting: Green versus Nongreen Products," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 263-284, 03.
- Chialin Chen, 2001. "Design for the Environment: A Quality-Based Model for Green Product Development," Management Science, INFORMS, vol. 47(2), pages 250-263, February.
When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:268. 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: (Barbara Piazzi)
If references are entirely missing, you can add them using this form.