Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101083
Authors: 
Arguedas, Carmen
Blanco, Esther
Year of Publication: 
2014
Series/Report no.: 
Working Papers in Economics and Statistics 2014-18
Abstract: 
We analyze the strategic decision of firms to voluntarily certify corporate social responsibility (CSR) practices in a context where other firms can falsely pretend to be socially responsible. Equilibrium outcomes are crucially determined by consumers' beliefs about the credibility of firms' CSR claims, which depend in turn on the (expected) fines for fraud. First, we show that an increase in such fines extends the likelihood of firms investing in CSR, at the expense of a reduced likelihood of certification. Second, fraud only arises when the fines for fraud are at intermediate levels and some CSR firms do not certify their practices. Third, the presence of fraud comes at a cost for firms by inducing lower equilibrium prices than in settings with honest marketing. Forth, the coexistence of fraud and certification induces differentiation price premia below marginal production costs and certification price premia above marginal certification costs. Lastly, social welfare rises as fines for fraud increase.
Subjects: 
corporate social responsibility
credence goods
certification
fraud
JEL: 
C72
D43
H23
Q58
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.