Effects of corporate social responsibility considering emission restrictions

Abstract

Emission restriction reduces total emission and protects environment. With game theory model, this paper investigates firm's corporate social responsibility (CSR) practices by taking emission restriction into account. CSR means a firm care about consumer surplus and environment pollution result in greenhouse gas emission in this study. All the effects of CSR practices, emission restriction and their interactions on firms’ strategies are captured under duopoly Cournot competition. Some interesting conclusions are achieved. Firstly, the firm subjects to emission restriction prices lower than its profit maximum (PM) rival. Secondly, if the CSR firm is subject to emission restriction, social concern has no effect on firms’ prices, outputs, profits and social welfare. Thirdly, social welfare decreases with product substitutability. Interestingly, when the CSR firm's emission restriction is non-binding, both CSR firm's profits and social welfare has inverse U-shaped relationships with social concern. Finally, this paper finds that the optimal level of social concern under the status that CSR firm aims to achieve maximum profits is lower than that under the condition the CSR firms aim to obtain maximum social welfare.