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Corporate Social Responsibility and Optimal Pigouvian Taxation

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  • Villena, Mauricio

Abstract

We formally study Pigouvian taxation in a duopoly market in which a CSR firm interacts with a profit maximizing firm. Unlike previous literature, we consider three different scenarios: (i) the CSR firm acts as a consumer-friendly firm, cares for not only its profits but also consumer surplus, as a proxy of its concern for its "stakeholders" or consumers; (ii) the CSR firm main objective is a combination of its own profit and the environment, caring for the environmental damage produced by the market in which it interacts; and (iii) the CSR firm is both consumer and environmental friendly. Finally, we compare the different Pigouvian rules derived with the first best competitive market solution and the monopoly/duopoly second best solutions.

Suggested Citation

  • Villena, Mauricio, 2019. "Corporate Social Responsibility and Optimal Pigouvian Taxation," MPRA Paper 100550, University Library of Munich, Germany, revised 01 Apr 2020.
    • Handle: RePEc:pra:mprapa:100550
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    References listed on IDEAS

    as
    1. Liu, Chih-Chen & Wang, Leonard F.S. & Lee, Sang-Ho, 2015. "Strategic environmental corporate social responsibility in a differentiated duopoly market," Economics Letters, Elsevier, vol. 129(C), pages 108-111.
    2. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-1041, December.
    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. Kopel, Michael & Brand, Björn, 2012. "Socially responsible firms and endogenous choice of strategic incentives," Economic Modelling, Elsevier, vol. 29(3), pages 982-989.
    5. 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.
    6. 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.
    7. repec:wly:soecon:v:81:2:y:2014:p:457-473 is not listed on IDEAS
    8. Björn Brand & Michael Grothe, 2015. "Social responsibility in a bilateral monopoly," Journal of Economics, Springer, vol. 115(3), pages 275-289, July.
    9. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    10. 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.
    11. Villena, Mauricio, 2019. "What Corporate Social Responsibility Motivations are better for The Environment?," MPRA Paper 100267, University Library of Munich, Germany, revised 01 May 2020.
    12. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate social responsibility; consumer-friendly firm; environment-friendly firm; Mixed Duopoly; Emission Taxation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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