Penalties for Social Concern in a Bilateral Monopoly

Abstract

This study explores the impact of firms' social concerns within a linear bilateral monopoly, accounting for diseconomies of scale. By incorporating social responsibility into firms’ objectives, the study assesses its impact on the market. Our findings reveal that when the demand is elastic or there are significant diseconomies of scale, a retailer may opt for a negative level of social concern, thereby potentially exacerbating the double marginalization problem.

Keywords: bilateral monopoly, double marginalization problem, consumer-friendly firm, CSR

JEL Classification: D21, L12, L22, M14