A mixed duopoly setting is examined where a private non-profit firm (NPO) competes with a private profit-maximizer. The NPO's stakeholders select a contract for their managers. A novel NPO objective function is utilized which takes into account all the likely returns to the NPO's stakeholders (NPO profits and the surplus accruing to the NPO stakeholders) in such a commercial setting. In sub-game perfect equilibria, it is shown that the NPO's managers generally will not be given the NPO's true objective to optimize. It is also shown that aggregate social welfare may increase or decrease due to this managerial contracting behavior or the use of NPO membership fees. Copyright © 2007 John Wiley & Sons, Ltd.

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We analyze a stylized distribution channel (bilateral monopoly) model where an upstream manufacturer sells output to a downstream retailer. In a two-stage linear demand game setting, we show that a two-part contract, consisting of a wholesale price and corporate social responsibility (CSR) component, can be utilized by the manufacturer to fully coordinate and control its retailer. Thus, a CSR contract can be used in place of the traditional twopart tariff scheme (wholesale price and fixed franchise fee) to optimally coordinate the marketing channel. Our model provides a novel theoretical profit-maximizing rationale for the strategic use of CSR.