Believing in Corporate Social Responsibility — An Indirect Evolutionary Analysis
Werner Güth and Oliver KirchkampOn a global market firms are randomly paired to engage in duopolistic competition based on conjectural payoffs, possibly different from true profits. Evolutionary fitness follows true profits. Competitors have beliefs how competitor's price and own Corporate Social Responsibility (CSR) expenditures determine own demand. In the tradition of indirect evolution, specifically evolution of preferences, we first solve all possible duopoly markets, based on commonly known payoff conjectures. We then derive evolutionarily stable conjectures. Believing that CSR expenditures enhance demand is evolutionarily stable only when this is true. In contrast, evolutionarily stable beliefs concerning price interdependence usually differ from actual price interdependence.
Keywords: Corporate social responsibility, indirect evolution
JEL: C73, M14
- Here is the most recent version of the working paper as of 14 December 2020.
- On 2 February 2021, the paper has been accepted for publication at the Journal of Institutional and Theoretical Economics (JITE). Vol 177(2), pp. 167-177..