Corporate social responsibility and strategic trade policy: an endogenous timing game and its policy implications

Cho, Sumi and Lee, Sang-Ho and Hoang, Xoan (2019): Corporate social responsibility and strategic trade policy: an endogenous timing game and its policy implications.

Abstract

This study incorporates the corporate social responsibility (CSR) initiatives of a domestic firm and analyzes strategic trade policy toward a foreign firm in a different market structure. We show that the tariff rate under a foreign (domestic) firm’s leadership is lowest when the degree of CSR is large (small). We also show that the foreign firm’s leadership yields the highest welfare when the degree of CSR is intermediate, while the domestic firm’s leadership yields the highest welfare otherwise. In an endogenous-timing game, we show that a simultaneous-move outcome is the unique equilibrium when the degree of CSR is small; thus, it is never socially desirable. We also show that the domestic firm’s leadership can be an equilibrium, which results in the highest welfare when the degree of CSR is large. Finally, when the degree of CSR is large, collusive behaviors between the domestic and foreign firms can increase welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: corporate social responsibility; strategic trade policy; endogenous-timing game; simultaneous-move; sequential-move
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions ; NGOs ; Social Entrepreneurship

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