Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237796 
Year of Publication: 
2021
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2021-063/VII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
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.
Subjects: 
CSR
voluntary agreement
cartel
competition policy
externalities
regulation
JEL: 
K21
L13
L40
Q01
Document Type: 
Working Paper

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