Transformations  in
Business & Economics

CORPORATE SOCIAL RESPONSIBILITY AND CAPACITY SELECTION
Junlong Chen, Jiali Liu, Jichen Qin

ABSTRACT. This paper establishes a capacity decision model with corporate social responsibility (CSR) and product differentiation (PD), derives the market equilibrium outcomes under Cournot and Bertrand competitions, and discloses the impacts of CSR and PD on excess capacity and social welfare under the two competition modes. Then, the results of the two competition modes are compared. The results show that, the equilibrium between capacity and output only occurs under specific conditions, while excess capacity and insufficient capacity are both possible. Both CSR and PD have impacts on excess capacity and social welfare and affect each other's impacts on the two issues.
When CSR and PD obey a specific relationship, the two competition modes have the same excess capacity and social welfare. When CSR exceeds a certain level, Bertrand competition gets higher excess capacity and lower social welfare .

KEYWORDS:  corporate social responsibility, product differentiation, capacity selection, excess capacity, social welfare.

JEL classification:  L11; L13; L51.