Corporate social responsibility, loan commitment, and social welfare in network duopoly

Abstract

We investigate strategic corporate social responsibility (CSR) in a network duopoly with loan commitments. We find that the optimal rate of a bank loan decreases with an increasing degree of CSR under certain conditions. The firm's strategic behavior in imperfect competition concerning CSR is beneficial to society with the support of financial institution. It is possibly due to the fact that CSR adopted by a firm is used as a strategic commitment device to capture a larger market share coupled with demand‐side network effects. Our results have important implications on financial policies in a network industry.