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Merger incentive and strategic CSR by a multiproduct corporation

Garcia, Arturo and Leal, Mariel and Lee, Sang-Ho (2020): Merger incentive and strategic CSR by a multiproduct corporation.

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Abstract

This study investigates an interplay between strategic CSR (corporate social responsibility) by a multiproduct corporation and merger decisions by rival firms each having single plant. We examine and compare two different timings of choosing CSR, i.e., ”merge-then-CSR” and ”CSR-then-merge” games. In the former case, we show that the level of CSR increases in products substitutability, but its level under merger is lower than that without merger. In the latter case where a multiproduct corporation can commit to a higher level of CSR before rival firms’ mergers, however, the level of CSR decreases in products substitutability and it might increase not only consumer surplus but social welfare.

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