This paper investigates how CSR firms influence a Cournot oligopoly with pollution. We define as CSR a firm that takes into account not only its profits but also internalises its own share of the externality and is sensitive to consumer surplus. The CSR firm obtains higher profits compared to profit-seeking firms. Also, the presence of at least one CSR firm improves social welfare and makes the first best Pigouvian taxation more lenient for Cournot firms. Finally, the CSR firm may induce the other firms to invest in "green" technology.
We investigate a linear state differential game describing an asymmetric Cournot duopoly with\ud
capacity accumulation a la Ramsey and a negative environmental externality (pollution), in\ud
which one of the firms has adopted corporate social responsibility (CSR) in its statute, and\ud
therefore includes consumer surplus and the environmental effects of production in its\ud
objective function. If the market is sufficiently large, the CSR firm sells more, accumulates\ud
more capital, and earns higher profits than its profit-seeking rival
We examine the relationship between competition and innovation in an industry where production is polluting and R&D aims to reduce emissions ("green" innovation). We present an n-firm oligopoly where firms compete in quantities and decide their investment in "green" R&D.When environmental taxation is exogenous, aggregate R&D investment always increases with the number of firms in the industry. Next we analyse the case where the emission tax is set endogenously by a regulator (committed or time-consistent) with the aim to maximise social welfare. We show that an inverted-U relationship exists between aggregate R&D and industry size under reasonable conditions, and is driven by the presence of R&D spillovers.JEL codes: Q55, Q56, O30, L13.
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