Corporate Social Responsibility by Joint Agreement

Tinbergen Institute Discussion Paper 2021-063/VII

51 Pages Posted: 8 Jul 2021 Last revised: 12 Oct 2021

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Leonard Treuren

KU Leuven - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 4, 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 competitors 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 are also possibly intrinsically motivated, to invest in 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 motivation 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 justify a production agreement under a broader 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 4, 2021). Tinbergen Institute Discussion Paper 2021-063/VII, Available at SSRN: https://ssrn.com/abstract=3880053 or http://dx.doi.org/10.2139/ssrn.3880053

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
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Netherlands

Leonard Treuren

KU Leuven - Department of Economics ( email )

Naamsestraat 69
Leuven, Vlaams-Brabant 3000
Belgium

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

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