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Journal of Industry, Competition and Trade

, Volume 18, Issue 3, pp 319–348 | Cite as

Endogenous Market Structures in the Presence of a Socially Responsible Firm

  • Yasuhiko Nakamura
Article
  • 159 Downloads

Abstract

We consider the endogenous selection of strategic contracts in an asymmetric duopoly with substitutable goods. the duopoly comprises a typical managerial firm with a sales delegation and a socially responsible firm (CSR firm) with a linear combination of social welfare and quantity as its managerial delegation contract. In particular, we examine how the equilibrium market structure changes from the case wthere both firms adopt sales delegation contracts to the case wthere one of the firms becomes a CSR firm, after the owners of the firms select their strategic contracts. We show that two market structures that are asymmetric with respect to their strategic contracts can become equilibrium market structures under the pure strategic contract class. Furthermore, we consider a unique mixed strategy equilibrium to examine how the risk domination between the two asymmetric equilibrium market structures affects equilibrium selection. there, we find that the competition wthere the firm with the sales delegation and the CSR firm have a price contract and a quantity contract, respectively, risk-dominates the competition wthere the firms have a quantity contract and a price contract, respectively. Finally, by deriving the order of social welfare among the four subgames, we show that the social incentive does not coincide with the private incentive in the robust equilibrium with respect to risk domination in the endogenous selection game of the strategic contracts of the asymmetric duopoly with the firm with a sales delegation and the CSR firm.

Keywords

Corporate social responsibility Cournot Bertrand Sales delegation Duopoly 

JEL Classification

L13 D43 

Notes

Acknowledgments

We are grateful for the financial support of the Inamori Foundation, the Seimeikai Foundation (16-002), and KAKENHI (16K03665).

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.College of EconomicsNihon UniversityChiyoda-kuJapan

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