The strategic incentive of corporate social responsibility in a vertically related market

We build a duopoly supply chain model to find the optimal degree of CSR. It shows that a unique interior solution exists when the two brand firms decide their manufacturers' degree of CSR; but when they decide the distributors' degree of CSR, they enforce these distributors to fully participate in the CSR activities. Moreover, in the former case, even though consumer surplus and social welfare are better off, the two brand firms' revenues are worse off; in contrast, in the latter case, although consumer surplus and social welfare are worse off, the two brand firms can obtain more revenue.