A strategic analysis of incorporating CSR into managerial incentive design

A strategic analysis is conducted to incorporate corporate social responsibility (CSR) considerations into managerial incentive design in a duopoly where each firm comprises an owner and a manager. Consumer surplus is adopted to represent the firms’ CSR concerns and a CSR-related incentive is introduced to accommodate both profit and consumer surplus. Bertrand and Cournot competition modes are discussed with the firms’ products being complementary, independent, or substitutable. We first examine the equilibrium of CSR-related incentive design and, then, analyze how CSR-related incentives affect the firms’ profitability and CSR performance, measured by consumer surplus and social welfare.

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