Signaling Product Quality Information in Supply Chains via Corporate Social Responsibility Choices

Abstract

This study focuses on how an upstream supplier signals the private information of its product quality with corporate social responsibility (CSR) choices to a downstream retailer and uninformed consumers in the final market. We build a signaling model to: capture the strategic interactions among the supplier, the retailer, and the final consumers in the supply chain; characterize completely the set of all separating perfect Bayesian equilibriums (PBEs); and finally, select a unique equilibrium that satisfies the intuitive criterion for exploring some comparative statics. The equilibrium results show that under some technical conditions: (1) a set of moderate levels of CSR conduct signal the upstream supplier's high quality in the sense of separating PBEs; (2) the unique separating PBE satisfying the intuitive criterion is the one with the lowest CSR level that separates a high-quality supplier from a low-quality supplier; (3) the lowest CSR level decreases in the proportion of informed consumers and the low-quality supplier's marginal CSR cost, but is independent of the high-quality supplier's marginal CSR cost; (4) the profits of the high-quality supplier increase in proportion to the number of informed consumers and the low-quality supplier's marginal cost CSR, but decrease in proportion to the high-quality supplier's marginal CSR cost. Managerial insights are also discussed.

Decision Analysis of Manufacturer-Led Closed-Loop Supply Chain Considering Corporate Social Responsibility

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Online Voluntary Transparency in Spanish Retail Firms. Measurement Index and CSR-Related Factors as Determinants

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