Corporate Social Responsibility by Joint Agreement

49 Pages Posted: 8 Jul 2021

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Leonard Treuren

University of Amsterdam - Amsterdam School of Economics (ASE)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2021

Abstract

Industry-wide voluntary agreements are touted as a means for corporations to take more corporate social responsibility (CSR). We study what type of joint CSR agreement induces firms to increase CSR efforts in a model of oligopolistic competition with differentiated products. Consumers have a willingness to pay for more responsibly manufactured products. Firms are driven by profit, and possibly by intrinsic motivation, to invest in costly CSR efforts. We find that cooperative agreements directly on the level of CSR reduce CSR efforts compared to competition. Such agreements throttle both for-profit and intrinsic motivations for CSR. CSR efforts only increase if agreements are permitted solely on output. Such production agreements, however, reduce total welfare in the market and raise antitrust concerns. Taking externalities into account may help to justify a production agreement under a total welfare standard, but not agreements on CSR directly. Moreover, simply requiring a higher CSR level by regulation while preserving competition always gives higher within-market welfare.

Keywords: CSR, voluntary agreement, cartel, competition policy, externalities, regulation

JEL Classification: K21, L13, L40, Q01

Suggested Citation

Schinkel, Maarten Pieter and Treuren, Leonard, Corporate Social Responsibility by Joint Agreement (July 2, 2021). Amsterdam Law School Research Paper No. 2021-01, Amsterdam Center for Law & Economics Working Paper No. 2021-01, Available at SSRN: https://ssrn.com/abstract=3878784 or http://dx.doi.org/10.2139/ssrn.3878784

Maarten Pieter Schinkel (Contact Author)

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 ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Leonard Treuren

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

HOME PAGE: http://sites.google.com/view/leonardtreuren/home

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