Certification of corporate social responsibility activities in oligopolistic markets

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Abstract

Abstract We investigate the impact of alternative certifying institutions on firms’ incentives to engage in costly Corporate Social Responsibility (CSR) activities as well as their relative market and societal implications. We find that the CSR certification standard is the lowest under for‐profit private certifiers and the highest under a Non Governmental Organization (NGO), with the standard of a welfare‐maximizing public certifier lying in between. Yet, regarding industry output, this ranking is reversed. Certification of CSR activities is welfare enhancing for consumers and firms and should be encouraged. Finally, the market and societal outcomes of CSR certification depend crucially on whether certification takes place before or after firms’ CSR activities.

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