Corporate Goodwill: A Game Theoretic Approach to the Effect of Corporate Charitable Expenditures on Firm Behaviour
Abstract
Corporate contributions to charity, like
advertising expenditures, may have a long-term effect on a firm's
image and profits. Recent examples of corporate giving show that
many gifts are made in the 'enlightened self-interest' of the donor.
One way to view corporate giving is as a managerial tool that
affects the firnis profits. This paper examines charitable spending,
where firms treat 'goodwill' expenditures in both the product and
factor markets as strategic variables. Contributions may be
enhanced or impaired by contributions made by other firms. The
model allows firms to make decisions about corporate giving that
are cooperative or noncooperative, where efficiency is gained
through cooperation. Market conditions determine whether
cooperation is sustainable. As the time horizon lengthens, the
discount factor of future earnings rises, or the level of industry
cooperation rises, and firms are more likely to cooperate in
charitable giving.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.Collections
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