A Theory of Corporate Social Responsibility in Oligopolistic Markets∗

This paper provides a theory of corporate social responsibility in imperfectly competitive markets. We consider a two-stage game where consumers have a preference from buying goods from firms that do CSR and where firms first de-cide simultaneously the amount per unit sold to give to social causes and then choose quantities. We find that firms will do CSR when products are comple-ments but might not do it when products are substitutes. We characterize how contributions to social causes depend on costs of production and on the degree of product differentiation. Finally, we show that CSR increases quantities, prices and profits