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Linking Economic and Social-Exchange Games: From the Community Norm to CSR

Author

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  • Masahiko Aoki

    () (Economics Department, Stanford University)

Abstract

This paper proposes an approach to the roles of social norm dealing with economic externalities. Traditionally social norms are treated by economists as external constraints or endogenous outcomes of repeated economic transactions. In contrast, this paper formulates a game of social exchanges and characterizes the role of social norm in regulating a game of economic transactions as equilibrium of linked games. Advantage of this approach is manifold: it can clarify conditions for social norm to regulate economic externalities when endogenous reputation mechanisms fail as well as to facilitate, rather than deter, a change in economic institution. More specifically, it suggests a solution to the empirical paradox of why a corporate social responsibility program sometimes contributes to a firm's better stock market performance.

Suggested Citation

  • Masahiko Aoki, 2007. "Linking Economic and Social-Exchange Games: From the Community Norm to CSR," Discussion Papers 07-018, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:07-018
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    File URL: http://www-siepr.stanford.edu/repec/sip/07-018.pdf
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    References listed on IDEAS

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    3. Ottati, Gabi Dei, 1994. "Trust, Interlinking Transactions and Credit in the Industrial District," Cambridge Journal of Economics, Oxford University Press, vol. 18(6), pages 529-546, December.
    4. Robert Aumann & Adam Brandenburger, 2014. "Epistemic Conditions for Nash Equilibrium," World Scientific Book Chapters,in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 5, pages 113-136 World Scientific Publishing Co. Pte. Ltd..
    5. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
    6. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-548, June.
    7. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    8. Craig L Infanger, 1993. "The Agrarian Origins of Commerce and Industry, A Study of Peasant Marketing in Indonesia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 35(2), pages 60-62, July.
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    Cited by:

    1. Cheung, Adrian (Wai Kong), 2016. "Corporate social responsibility and corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 412-430.

    More about this item

    Keywords

    social norm; social capital; linked games; corporate social responsibility (CSR);

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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