Cooperation with a multiproduct corporation in a strategic managerial delegation

Abstract

We consider an industry composed of a multiproduct corporation that adopts corporate social responsibility (CSR) as a strategic managerial delegation and examine the profit‐incentive to form a cooperative group. We find that competition is an equilibrium for any degree of substitutability and yields the highest CSR, which is increasing in the degree of substitutability. We also show that full cooperation is an equilibrium for lower substitutability but induces no CSR, whereas partial cooperation with one uniplant firm is an equilibrium for higher substitutability but yields lower CSR than that under competition. Therefore, cooperation might reduce strategic CSR activities, whereas competition will encourage higher CSR but yield lower industry profits.