This work revisits the R&D duopoly à la d’Aspremont and Jacquemin (1988, 1990) (AJ henceforth) considering an economy with firms engaged in corporate social responsibility (CSR). In the traditional AJ setting without spill-over effects, firms invest in R&D as a sub-game perfect Nash equilibrium (SPNE) strategy, but they are cast into a prisoner’s dilemma. Socially responsible firms can get the same SPNE result. Preliminarily, we show that the level of firms' social concern has a positive effect on the R&D investment. Unlike the basic framework, however, if the consumer welfare weights enough in each firm’s objective, investing in R&D becomes a firm’s utility-enhancing strategy also without R&D spillovers: the prisoner’s dilemma vanishes, and the R&D investment-decision game with CSR turns out to be an anti-prisoner’s dilemma, in which investing in R&D is the firm’s Pareto-efficient choice. Then, if firms are CSR-oriented, investing in R&D becomes a Pareto-superior outcome for society (with or without R&D spillovers).

A note on R&D innovation with socially responsible firms

Luciano Fanti;Luca Gori
2022-01-01

Abstract

This work revisits the R&D duopoly à la d’Aspremont and Jacquemin (1988, 1990) (AJ henceforth) considering an economy with firms engaged in corporate social responsibility (CSR). In the traditional AJ setting without spill-over effects, firms invest in R&D as a sub-game perfect Nash equilibrium (SPNE) strategy, but they are cast into a prisoner’s dilemma. Socially responsible firms can get the same SPNE result. Preliminarily, we show that the level of firms' social concern has a positive effect on the R&D investment. Unlike the basic framework, however, if the consumer welfare weights enough in each firm’s objective, investing in R&D becomes a firm’s utility-enhancing strategy also without R&D spillovers: the prisoner’s dilemma vanishes, and the R&D investment-decision game with CSR turns out to be an anti-prisoner’s dilemma, in which investing in R&D is the firm’s Pareto-efficient choice. Then, if firms are CSR-oriented, investing in R&D becomes a Pareto-superior outcome for society (with or without R&D spillovers).
2022
Buccella, Domenico; Fanti, Luciano; Gori, Luca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11568/1157999
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