Corporate Social Responsibility by Joint Agreement

Industry-wide voluntary agreements are touted as a means for corporations to take more corporate social responsibility (CSR). We study what type of joint CSR agreement induces firms increase efforts in model oligopolistic competition with differentiated products. Consumers have willingness pay responsibly manufactured Firms driven by profit, and possibly intrinsic motivation, invest costly efforts. find that cooperative directly on the level reduce compared competition. Such throttle both for-profit motivations CSR. only if permitted solely output. production agreements, however, total welfare market raise antitrust concerns. Taking externalities into account may help justify under standard, but not directly. Moreover, simply requiring higher regulation while preserving always gives within-market welfare.