Université de Lausanne
Faculté des HEC
Département d'économétrie et d'économie politique

Cahier de recherches économiques du DEEP No. 09.04

Claudia Alves
Luís Santos-Pinto

A Theory of Corporate Social Responsibility in Oligopolistic Markets

October 2008

Abstract
This paper provides a theory of corporate social responsibility in imperfectly competitive markets. We consider a two-stage game where consumers have a preference from buying goods from firms that do CSR and where firms first decide simultaneously the amount per unit sold to give to social causes and then choose quantities. We find that firms will do CSR when products are complements but might not do it when products are substitutes. We characterize how contributions to social causes depend on costs of production and on the degree of product differentiation. Finally, we show that CSR increases quantities, prices and profits.

Keywords: corporate social responsibility; oligopoly; market outcomes

JEL classification: D21; D43; D64; M14