A game-theoretic analysis of social responsibility conduct in two-echelon supply chains

This research investigates how two supply chain members, a downstream firm (F) and an upstream supplier (S), interact with each other with respect to corporate social responsibility (CSR) behavior and what impact exogenous parameters may have on this interaction. A game-theoretic analysis is conducted to obtain equilibriums for both simultaneous-move and sequential-move CSR games. Under certain assumptions, it is concluded that (1) there exists a mutual incentive between their CSR behavior, whereby a win-win performance in terms of both CSR and profitability is achieved as long as exogenous parameters exceed certain critical thresholds; (2) a higher consumer marginal social-benefit potential (MSBP) or a lower consumer marginal perception difficulty (MPD) helps to lower the critical thresholds of CSR budgets and CSR operational efficiency by S and F, making it easier to achieve the win-win performance; (3) an increase in one supply chain member's CSR budget or CSR operational efficiency tends to make the supply chain easier to attain a win-win performance scenario; (4) if CSR decisions are made sequentially, a prior commitment to CSR activities from one supply chain member strengthens the mutual incentive and facilitates the realization of the win-win performance. Business implications of these research findings are also discussed.