Bargaining power in bilateral monopoly and cooperative choice of corporate social responsibility

Abstract

ABSTRACT We analyse the cooperative choice of corporate social responsibility when a manufacturer and a retailer in a bilateral monopoly may hold different bargaining powers. We find that an increase in the bargaining power of one of the firms leads to an increase in the degree of social concern of the other firm in the bilateral monopoly and a reduction in its own degree of social concern. It also leads to an increase in the firm´s own profits and a reduction in the other firm’s profits, but it has no effect on the quantity sold, its price, total profits, consumer surplus or social surplus. Just as in the symmetric case, both the manufacturer and the retailer cooperatively choose higher degrees of social concern than under a non-cooperative framework and these choices completely solve the double-marginalization problem.