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March 10, 2026Managerial and Decision Economics0 citations

Endogenous Market Structure With Upstream Corporate Social Responsibility

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RMRyo MasuyamaTMTomomichi Mizuno

Key Points

  • To analyze how upstream corporate social responsibility affects competition among downstream firms.
  • Examined a vertical market model with one CSR upstream firm and two differentiated downstream firms.
  • Analyzed different competition structures: Cournot, Bertrand, and Cournot–Bertrand.
  • Evaluated implications of high levels of upstream CSR on market competition.
  • Bertrand competition arises in the downstream market when upstream CSR is high.
  • Consumer surplus increases under Bertrand competition due to lower input prices from the CSR firm.
  • Downstream firms achieve higher profits when Bertrand competition is prevalent.

Abstract

ABSTRACT Firms in many industries engage in corporate social responsibility (CSR). We consider a vertical market with one upstream firm committed to CSR and two downstream firms providing differentiated goods, and analyze the endogenous market structure (Cournot, Bertrand, or Cournot–Bertrand competition) between the downstream firms. Contrary to conventional wisdom, we show that Bertrand competition emerges in the downstream market when the degree of upstream CSR is high. Under Bertrand competition, consumer surplus is larger, and the upstream firm with CSR prioritizes consumer surplus, which results in a lower input price. Consequently, the downstream firms earn higher profits under Bertrand competition.

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Cite This Study

Masuyama et al. (2026) studied this question.

synapsesocial.com/papers/69af952b70916d39fea4c7a0https://doi.org/10.1002/mde.70092
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