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Caring or Pretending to Care? Social Impact, Firms' Objectives, and Welfare (former title: Social Responsibility and Firm's Objectives)

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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Preprints, Working Papers, ...
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https://hal-sciencespo.archives-ouvertes.fr/hal-03393065
Contributor : Melissa Mundell Connect in order to contact the contributor
Submitted on : Thursday, September 29, 2022 - 3:10:56 PM
Last modification on : Tuesday, October 18, 2022 - 4:14:01 AM

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Distributed under a Creative Commons Attribution - NoDerivatives 4.0 International License

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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). {date}. ⟨hal-03393065v2⟩

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