Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (former title: Social Responsibility and Firm's Objectives) - Archive ouverte HAL Access content directly
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Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (former title: Social Responsibility and Firm's Objectives)

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Michele Fioretti

Abstract

Many firms claim that “social impact” influences their strategies. This paper develops a structural model that quantifies social impact as the sum of surpluses to a firm and its stakeholders. With data from a for-profit firm whose prosocial expenditures are measurable and salient to consumers, the analysis shows that the firm spends prosocially beyond profit maximization, thereby increasing welfare substantially. Incentivizing a standard profit-maximizing firm to behave similarly would require subsidies amounting to 58% of its prosocial expenditures because consumers’ willingness to pay is relatively inelastic to prosocial expenses. Therefore, social impact resembles a self-imposed welfare enhancing tax with limited pass-through.
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Dates and versions

hal-03393065 , version 1 (21-10-2021)
hal-03393065 , version 2 (29-09-2022)

Licence

Attribution - NoDerivatives - CC BY 4.0

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Michele Fioretti. Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (former title: Social Responsibility and Firm's Objectives). 2022. ⟨hal-03393065v2⟩
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