Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison

Abstract

This study considers the strategic relations between emission tax and environmental corporate social responsibility (ECSR) in a Cournot–Bertrand comparison and analyzes two different timings of the games between a tax-then-ECSR (T game) and an ECSR-then-tax (E game). We show that the T game always yields higher emission tax than the E game irrespective of competition modes, but lower ECSR under Cournot competition and higher ECSR when the marginal damage is high under Bertrand competition. We also show that compared with Bertrand competition, Cournot competition yields lower (higher) ECSR in the T (E) game but lower emission tax in the E game and higher emission tax when the product substitutability is low in the T game. We finally show that firms endogenously choose Cournot competition with the commitment of the E game irrespective of marginal damage and product substitutability.