The Business of Business is Business: Why (Some) Firms Should Provide Public Goods when they Sell Private Goods

Abstract

This note links the commodity bundling literature with the literature on the private provision of public goods. We discuss the potential profitability of bundling strategies for both private firms and charitable organizations. Even in the absence of consumption complementarities, we show important cases when private and public goods should be bundled. For example, both a monopolist and a charity can profit from bundling the goods they provide. Linking sales to charitable contributions can also be beneficial for for-profit firms as it alleviates price-competition. Beyond providing a theoretical framework for understanding the incentive properties of bundling private and public goods, the study lends insights into the debate on the efficacy of corporate social responsibility.