Corporate Social Responsibility by Joint Agreement

Maarten Pieter Schinkel and Leonard Treuren
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Maarten Pieter Schinkel: University of Amsterdam
Leonard Treuren: University of Amsterdam

No 21-063/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

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 higher willingness to pay for more responsibly produced goods and services. Firms are driven by profit, and are also possibly intrinsically motivated, to invest in CSR. 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. Simply setting a higher mandatory CSR standard by regulation while preserving competition always gives higher within-market welfare.

Keywords: CSR; voluntary agreement; cartel; competition policy; externalities; regulation (search for similar items in EconPapers)
JEL-codes: K21 L13 L40 Q01 (search for similar items in EconPapers)
Date: 2021-07-04
New Economics Papers: this item is included in nep-com, nep-env and nep-law
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Citations: View citations in EconPapers (2)

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