624 / 2024-04-28 15:19:06

Corporate Social Responsibility Disclosure Under Asymmetric Information on Supplier’s Responsibility

Corporate social responsibility; information asymmetric; disclosure strategy; signaling game

A brand owner, which sources from an upstream supplier and sells to the downstream consumers, normally has private information about the supplier’s corporate social responsibility (CSR) and has to decide whether or not to disclose such information to consumers. Consider the upstream supplier can be more responsible (h -type) or less responsible (l -type), facing different responsible violation risks, which impacts consumers’ purchasing utility. The brand owner chooses whether or not to disclose its private information on the supplier type to the consumers. Under the disclosure scenario, the brand owner informs the consumers about the supplier’s type. Under the non-disclosure scenarios, the brand owner signals the supplier’s type to consumers through CSR efforts and the price. By comparing equilibrium outcomes under two information scenarios, it is shown that the brand owner sourcing from an h-type supplier prefers to disclose the information, but it may not necessarily invest higher CSR efforts depending on the brand owner’s CSR cost coefficient and consumers’ belief regarding the brand owner sourcing from the h -type supplier. Whereas, the brand owner sourcing from an l-type supplier will choose not to disclose information. This is because the brand owner can achieve higher profits from pooling and reduce costs by reducing CSR investments under non-disclosure. As consumers’ belief regarding the brand owner sourcing from the h-type supplier increased, the benefits of disclosing the h-type supplier diminished while the benefits of not disclosing l-type suppliers increased. If the brand owner does not know the type of supplier, regardless of the supplier type, the brand owner always prefers to disclose information, under which the profit can be higher. Finally, this paper extends to examine the robustness of the results by considering the scenarios of myopic consumers and heterogeneous consumer valuation.