A game-theoretic analysis of social responsibility conduct in two-echelon supply chains

Abstract

Abstract This research investigates how two supply chain members, a downstream firm (F) and an upstream supplier (S), interact with each other with respect to corporate social responsibility (CSR) behavior and what impact exogenous parameters may have on this interaction. A game-theoretic analysis is conducted to obtain equilibriums for both simultaneous-move and sequential-move CSR games. Under certain assumptions, it is concluded that (1) there exists a mutual incentive between their CSR behavior, whereby a win–win performance in terms of both CSR and profitability is achieved as long as exogenous parameters exceed certain critical thresholds; (2) a higher consumer marginal social-benefit potential (MSBP) or a lower consumer marginal perception difficulty (MPD) helps to lower the critical thresholds of CSR budgets and CSR operational efficiency by S and F, making it easier to achieve the win–win performance; (3) an increase in one supply chain member's CSR budget or CSR operational efficiency tends to make the supply chain easier to attain a win–win performance scenario; (4) if CSR decisions are made sequentially, a prior commitment to CSR activities from one supply chain member strengthens the mutual incentive and facilitates the realization of the win–win performance. Business implications of these research findings are also discussed.