Corporate Social Responsibility and Environmental Taxation with Endogenous Entry

Xu, Lili and Lee, Sang-Ho (2018): Corporate Social Responsibility and Environmental Taxation with Endogenous Entry.

Abstract

This study considers Corporate Social Responsibility (CSR) in Cournot markets with endogenous entry and investigates the effects of CSR on environmental taxation and welfare consequences. We show that the optimal tax under free entry is higher than that under blockaded entry and also higher than marginal environmental damage. We then show that a higher taxation is socially excessive from the viewpoint of socially optimal CSR, which requires an appropriate regulatory framework for CSR promotion. Finally, we show that the environment is less damaged but social welfare deteriorates accompanied with CSR when the fixed cost is low, while pollution abatement activities will reduce the optimal tax and improves both environmental quality and social welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: consumer-friendly firm; corporate social responsibility; environmental tax; free entry; blockaded entry
• Subjects: 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; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics

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