Corporate social responsibility as an effective signal of food safety: the results of economic and mathematical modelling

The question of whether the strategy of undertaking corporate social responsibility (CSR) policy is an effective signal of a high level of food safety is considered in this paper. Despite the existence of some state mechanisms aimed at solving the lemon problem, the presence of a great number of fake and adulterated food on Russian food markets show that it has not been solved yet. Specificity of food (its experimental and trusting qualities) makes it impossible to evaluate the qualitative characteristics of food before it is purchased by customers. The analysis was based on Bertrand model with a differentiated product. Theoretic and game modelling resulted in articulation of the conditions for "desired" Nash equilibrium, where CSR policy is implemented by the companies producing safer food. The comparison of possible Nash equilibriums has lead us to the conclusion that the efficiency of CSR strategy as a quality signal is determined by the control and support of the manufacturers provided by the state and by the number of "responsible" health-conscientious customers. "Desired" Nash equilibrium may be reached without "responsible" customers, but with a high level of state support towards "honest" companies with a positive CSR record. This means that the weakness or lack of state mechanisms to support or encourage the manufactures, a small share of health-conscientious customers, their low activity in monitoring safety level when choosing food are among the factors determining the low activity of manufacturers in CSR policy implementation.