21 – Corporate Social Responsibility And Profit Maximizing Behaviour

Abstract
We examine the behavior of a profit maximizing monopolist in a horizontal differentiation model in which consumers differ in their degree of social responsibility (SR) and consumers SR is dynamically influenced by habit persistence.

The model outlines parametric conditions under which (consumer driven) corporate social responsibility is an optimal choice compatible with profit maximizing
behavior.

Introduction
The ongoing integration of labour and product markets has increased interdependence among countries and concerns for the problem of the insufficient provision of global public goods. The novelty in this scenario is that global problems are becoming increasingly correlated with individual well being, with environmental degradation affecting personal health and North-South per capita income and labour cost divide fuelling illegal immigration and endangering welfare of workers in the North.

This may be one of the reasons why the sensitiveness of the public opinion toward social responsibility is growing.