Endogenous environmental corporate social responsibility decisions of firms in mixed triopoly

Abstract

Abstract This paper develops a mixed triopoly model with a public firm, a private firm, and a mixed firm to examine the joint determination of environmental corporate social responsibility (ECSR), emission taxation, and ownership structure. Within a five‐stage game, firms choose ECSR levels, the government sets the optimal emission tax and degree of privatization, firms undertake pollution abatement, and output competition occurs under Cournot behavior. We characterize equilibrium outcomes under alternative ECSR regimes and subsequently endogenize firms' ECSR choices. The results show that emission taxation and ECSR are complementary instruments, as higher emission taxes induce greater environmental responsibility. We further establish that the environmental effectiveness of ECSR depends on the ownership identity of participating firms and that environmental damage may vary non‐monotonically with privatization. In particular, environmental damage exhibits an inverted‐U relationship with privatization when the public and mixed firms jointly undertake ECSR. Moreover, we identify a critical privatization threshold beyond which mixed ownership ceases to enhance social welfare. Finally, trilateral ECSR emerges as the unique equilibrium when environmental damages are sufficiently large. The analysis highlights the role of mixed ownership as an environmental governance mechanism and contributes to the literature on ECSR, mixed oligopoly, and environmental regulation.