Can Collaboration Promote Corporate Social Responsibility? Evidence from the Lab
Tinbergen Institute Discussion Paper 2019-034/VII
60 Pages Posted: 30 May 2019 Last revised: 24 Jun 2022
There are 2 versions of this paper
Can Collaboration Promote Corporate Social Responsibility? Evidence from the Lab
Date Written: November 12, 2019
Abstract
Competition has been argued to erode socially responsible behavior in markets,
suggesting that allowing collaborative agreements amongst competitors regarding corporate social responsibility (CSR) may promote public-interest objectives. We study this idea experimentally in a duopoly framework in which firms choose between offering a ‘fair’ and an ‘unfair’ good to consumers. When the unfair good is traded, a negative externality is imposed on a third party. We vary whether or not the firms are allowed to coordinate on the type of good they sell, while remaining in price competition. Theory predicts the fraction of fair goods traded only to increase when firms care little for the externality yet take the opportunity to collaborate to differentiate their products to soften price competition. We find instead that overall the opportunity to coordinate CSR efforts decreases product differentiation and has no significant impact on the fraction of fair goods traded. Average market prices, producer surplus, and consumer surplus are unaffected. However, third-party preferences are a powerful predictor for both consumer and firm behavior. Product variety does go up if firms’ third-party preferences are weak. Our findings suggest that growing consumer and managerial awareness contributes more to socially responsible behavior than opportunities for firms to coordinate their CSR activities. If CSR collaborations are to be allowed, this should be case-specific antitrust policy and not ageneric cartel exemption possibility.
Keywords: Corporate social responsibility, Sustainability, Collaboration, Antitrust, Laboratory experiment
JEL Classification: C92, D03, D62, L41, M14
Suggested Citation: Suggested Citation