IDEAS home Printed from https://ideas.repec.org/a/gam/jgames/v13y2022i3p38-d813765.html
   My bibliography  Save this article

Quid Pro Quo CSR and Trade Liberalization in a Bilateral Monopoly

Author

Listed:
  • Shih-Shen Chen

    (School of Economics and Management, Fuzhou University of International Studies and Trade, Fuzhou 350202, China)

  • Chien-Shu Tsai

    (Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung 807618, Taiwan)

  • Chen Chen

    (School of Economics and Management, Fuzhou University of International Studies and Trade, Fuzhou 350202, China)

Abstract

We construct a dynamic bilateral monopoly game to analyze the bargaining between a foreign manufacturer and a domestic retailer regarding the wholesale price and explain the foreign upstream firm’s corporate social responsibility (CSR) initiative and its economic impacts on the domestic market. Under free trade, the foreign upstream firm’s CSR initiative realizes improvements in consumer surplus and social welfare in the home country. A “win–win–win” strategy exists, as the foreign manufacturer has more of an incentive to implement CSR when the government implements a strategic trade policy. The consumer-friendly action implemented by the foreign upstream firm leads to adequate consumer welfare and social welfare, which mitigates the government’s political hostility. With the high bargaining power of the foreign upstream firm and the low weight of the consumer-friendly upstream firm, the government should set a higher tariff rate for the foreign upstream firm to extract rent and enhance social welfare.

Suggested Citation

  • Shih-Shen Chen & Chien-Shu Tsai & Chen Chen, 2022. "Quid Pro Quo CSR and Trade Liberalization in a Bilateral Monopoly," Games, MDPI, vol. 13(3), pages 1-11, May.
    • Handle: RePEc:gam:jgames:v:13:y:2022:i:3:p:38-:d:813765
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-4336/13/3/38/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-4336/13/3/38/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher T. Taylor & Daniel S. Hosken, 2007. "The Economic Effects Of The Marathon‐Ashland Joint Venture: The Importance Of Industry Supply Shocks And Vertical Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 419-451, September.
    2. Yasunori Ouchida, 2019. "Cooperative choice of corporate social responsibility in a bilateral monopoly model," Applied Economics Letters, Taylor & Francis Journals, vol. 26(10), pages 799-806, June.
    3. Gregory E. Goering, 2014. "The Profit‐Maximizing Case for Corporate Social Responsibility in a Bilateral Monopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(7), pages 493-499, October.
    4. Luciano Fanti & Domenico Buccella, 2020. "Publisher Correction: Social Responsibility in a Bilateral Monopoly with Downstream Convex Technology," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 777-777, December.
    5. Wang, Xingtang & Wang, Leonard F.S., 2021. "Vertical product differentiation, managerial delegation and social welfare in a vertically-related market," Mathematical Social Sciences, Elsevier, vol. 113(C), pages 149-159.
    6. Ya-Chin Wang, 2016. "R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 257-272, June.
    7. Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58(4), pages 347-347.
    8. Luciano Fanti & Domenico Buccella, 2020. "Social Responsibility in a Bilateral Monopoly with Downstream Convex Technology," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 761-776, December.
    9. Björn Brand & Michael Grothe, 2015. "Social responsibility in a bilateral monopoly," Journal of Economics, Springer, vol. 115(3), pages 275-289, July.
    10. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    11. Kenneth S. Corts, 2001. "The Strategic Effects of Vertical Market Structure: Common Agency and Divisionalization in the US Motion Picture Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 509-528, December.
    12. Goering, Gregory E., 2012. "Corporate social responsibility and marketing channel coordination," Research in Economics, Elsevier, vol. 66(2), pages 142-148.
    13. Leonard F. S. Wang & Ya‐Chin Wang & Lihong Zhao, 2012. "Tariff Policy And Welfare In An International Duopoly With Consumer‐Friendly Initiative," Bulletin of Economic Research, Wiley Blackwell, vol. 64(1), pages 56-64, January.
    14. Yang-Ming Chang & Hung-Yi Chen & Leonard F. S. Wang & Shih-Jye Wu, 2014. "Corporate Social Responsibility and International Competition: A Welfare Analysis," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 625-638, August.
    15. Issam Laguir & Raffaele Staglianò & Jamal Elbaz, 2015. "Does corporate social responsibility affect corporate tax aggressiveness?," Post-Print hal-02053812, HAL.
    16. Luciano Fanti & Domenico Buccella, 2021. "Strategic trade policy with interlocking cross-ownership," Journal of Economics, Springer, vol. 134(2), pages 147-174, October.
    17. Luciano Fanti & Domenico Buccella, 2020. "Strategic trade policy with socially concerned firms," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(3), pages 269-292, September.
    18. Lee, Chien-Hui & Lee, Jen-Yao & Wang, Leonard F.S., 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge Fernández-Ruiz, 2021. "Corporate social responsibility in a supply chain and competition from a vertically integrated firm," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(2), pages 209-233, June.
    2. Xingtang Wang & Leonard F. S. Wang, 2022. "Corporate social responsibility, vertical product differentiation, and privatization policy," The Japanese Economic Review, Springer, vol. 73(2), pages 403-425, April.
    3. Liu, Qian & Wang, Leonard F.S. & Chen, Charlie L., 2018. "CSR in an oligopoly with foreign competition: Policy and welfare implications," Economic Modelling, Elsevier, vol. 72(C), pages 1-7.
    4. Fukuda, Katsufumi & Ouchida, Yasunori, 2020. "Corporate social responsibility (CSR) and the environment: Does CSR increase emissions?," Energy Economics, Elsevier, vol. 92(C).
    5. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic Corporate Social Responsibility by a Multinational Firm and International Privatization Policies," MPRA Paper 105651, University Library of Munich, Germany.
    6. Chen, Charlie L. & Liu, Qian & Li, Jie & Wang, Leonard F.S., 2016. "Corporate social responsibility and downstream price competition with retailer's effort," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 36-54.
    7. Xu, Lili & Lee, Sang-Ho, 2018. "Corporate Social Responsibility And Environmental Taxation With Endogenous Entry," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 59(2), pages 61-82, December.
    8. Fanti, Luciano & Buccella, Domenico, 2018. "A note on the social responsibility in a bilateral monopoly," MPRA Paper 88162, University Library of Munich, Germany.
    9. Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2018. "The Timing Of Environmental Tax Policy With A Consumer-Friendly Firm," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 59(1), pages 25-43, June.
    10. Arturo García & Mariel Leal & Sang-Ho Lee, 2019. "Endogenous Timing with a Socially Responsible Firm," Korean Economic Review, Korean Economic Association, vol. 35, pages 345-370.
    11. García, Arturo & Leal, Mariel & Lee, Sang-Ho, 2018. "Time-inconsistent environmental policies with a consumer-friendly firm: Tradable permits versus emission tax," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 523-537.
    12. Luciano Fanti & Domenico Buccella, 2020. "Social Responsibility in a Bilateral Monopoly with Downstream Convex Technology," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 761-776, December.
    13. Seung-Leul Kim & Sang-Ho Lee & Toshihiro Matsumura, 2019. "Corporate social responsibility and privatization policy in a mixed oligopoly," Journal of Economics, Springer, vol. 128(1), pages 67-89, September.
    14. Luciano Fanti & Domenico Buccella, 2020. "Pareto-Superiority of Corporate Social Responsibility in Unionised Industries," Arthaniti: Journal of Economic Theory and Practice, , vol. 19(2), pages 131-150, December.
    15. Xu Lili & Lee Sang-Ho, 2022. "Corporate Profit Tax and Strategic Corporate Social Responsibility Under Foreign Acquisition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 22(1), pages 123-151, January.
    16. Bin Ying & Leonard F. S. Wang & Qidi Zhang, 2023. "Upstream collusion and corporate social responsibility in downstream competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1020-1028, March.
    17. Mauricio G. Villena & María José Quinteros, 2024. "Corporate Social Responsibility, Environmental Emissions and Time-Consistent Taxation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(1), pages 219-255, January.
    18. Zhang, Qidi & Wang, Leonard F.S., 2022. "Corporate social responsibility, entry and optimal privatization in an international mixed market," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 14-24.
    19. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications," MPRA Paper 108499, University Library of Munich, Germany.
    20. Xu, Lili & Fan, Xinying & Luan, Weixin, 2020. "Strategic corporate social responsibility of high-speed rail in China," China Economic Review, Elsevier, vol. 62(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jgames:v:13:y:2022:i:3:p:38-:d:813765. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.