Can Collusion Promote Corporate Social Responsibility? Evidence from the Lab

42 Pages Posted: 17 Apr 2019 Last revised: 16 May 2019

See all articles by Francisco Gomez-Martinez

Francisco Gomez-Martinez

Universidad Carlos III Madrid

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2019

Abstract

Competition has been argued to erode socially responsible behavior in markets, suggesting that allowing cartel agreements among firms may promote public interest objectives. We test this idea in a laboratory experiment. Participants playing the role of firms choose between offering a ‘fair’ and an ‘unfair’ good to a consumer participant. When the unfair good is traded, a negative externality is imposed on a third party. We vary whether or not the firms are allowed to coordinate on the type of good they sell. We find that the opportunity to coordinate has no significant impact on the fraction of fair goods traded on the market, but polarizes: more of the same good, fair or unfair, is offered. Consumer surplus and profit are, on average, not affected. Irrespective of whether coordination between firms is allowed, participants are more likely to trade the fair good, the stronger their third-party preferences are. These findings suggest that both consumer and managerial values are more important drivers of socially responsible behavior than opportunities for firms to coordinate their CSR activities. We highlight implications for competition policy, where cartels may be exempted on CSR grounds.

Keywords: Collusion, Corporate social responsibility, Public interest, Laboratory experiment, Competition policy

JEL Classification: C92, D03, D62, L41, M14

Suggested Citation

Gomez-Martinez, Francisco and Onderstal, Sander and Schinkel, Maarten Pieter, Can Collusion Promote Corporate Social Responsibility? Evidence from the Lab (April 16, 2019). Amsterdam Law School Research Paper No. 2019-13; Amsterdam Center for Law & Economics Working Paper No. 2019-02. Available at SSRN: https://ssrn.com/abstract=3372917 or http://dx.doi.org/10.2139/ssrn.3372917

Francisco Gomez-Martinez (Contact Author)

Universidad Carlos III Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain
+34694481107 (Phone)

HOME PAGE: http://www.eco.uc3m.es/personal/fragomez/

Sander Onderstal

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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