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

See all articles by Francisco Gomez-Martinez

Francisco Gomez-Martinez

Universidad Carlos III Madrid

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

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

Gomez-Martinez, Francisco and Onderstal, Sander and Schinkel, Maarten Pieter, Can Collaboration Promote Corporate Social Responsibility? Evidence from the Lab (November 12, 2019). Tinbergen Institute Discussion Paper 2019-034/VII, Available at SSRN: https://ssrn.com/abstract=3383591 or http://dx.doi.org/10.2139/ssrn.3383591

Francisco Gomez-Martinez (Contact Author)

Universidad Carlos III Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain
+34694481107 (Phone)

HOME PAGE: http://www.eco.uc3m.es/personal/fragomez/

Sander Onderstal

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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