Céline Bonnet (Toulouse School of Economics)
Firms are increasingly concerned about their impact on society as a whole. More and more companies now aim not only to maximise profits and financial returns for their shareholders, but also to address ethical, social, health and environmental issues. We use a structural econometric demand and supply model, which allows us to model consumer substitution patterns and firms’ strategic pricing behaviour within the market. We first evaluate the firms’ social impact of sugar, defined as the social welfare loss from the firm’s exit in the equilibrium where all competing firms remain in the market, as in Allcott et al. (2022). Using purchase data in the French dessert market, we show that the social impact within this market is not always negative and that the presence of some firms in a market can improve consumers’ sugar intake, which contrasts with standard measures of externalities. Next, we run a counterfactual analysis to assess the impact of internalising externalities to account for corporate social responsibility and various stakeholders’ actions on the consumers’ sugar intake. While internalising its own externalities reduces the quantities and sugar quantities the firm sells, it might increase the total sugar quantity at the industry level. By contrast, internalising the industry’s externalities might increase the sugar quantities sold by the firm, but it decreases the industry sugar quantity. When all firms internalise, the reduction efforts of individual firms decrease but the overall impact on the sugar intake generated by the industry is significant.