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Social responsibility in a bilateral monopoly with R&D

Garcia, Arturo and Leal, Mariel and Lee, Sang-Ho (2018): Social responsibility in a bilateral monopoly with R&D. Published in: Economics Bulletin , Vol. 38, No. 3 (13 April 2018): pp. 1467-1475.

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Abstract

This note examines social responsibility in a linear bilateral monopoly by incorporating a cost-reducing R&D investment and investigates an endogenous timing game. We find that in the presence of R&D, the retailer always adopts social responsibility irrespective of the timing of the game, but the manufacturer adopts only with its leadership in a sequential game where it can take the first-mover advantage. We also show that two sequential choices will be subgame perfect equilibria, but the commitment to the social responsibility by manufacturer is a payoff dominance outcome.

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