Partial Ownership for a Public Firm and Corporate Social Responsibility

Abstract

This paper introduces corporate social responsibility (CSR) into a traditional mixed oligopoly to examine effects of firms’ CSR activities on privatization of a public firm. Private CSR firms take both profits and consumer surplus into consideration. It is shown that the optimal degree of privatization (nationalization) decreases (increases) with an increase in the percentage of consumer surplus taken into account by the CSR firms. In other words, the government should hold more shares in the partially privatized firm when the private firms are CSR rather than pure profit-maximizing ones. Furthermore, we find that it is socially optimal that the CSR firms partly (not totally) consider consumers’ benefits.