Can incomplete information lead to better social outcomes? |
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Authors: | Ratul Lahkar Vinay Ramani |
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Institution: | 1. Department of Economics, Ashoka University, Rajiv Gandhi Education City, Sonipat, Haryana, India;2. Department of Economics, Indian Institute of Management, Visakhapatnam, Visakhapatnam, Andhra Pradesh, India |
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Abstract: | We consider a supply chain where manufacturers can be differentiated along two dimensions—product quality and cost of social responsibility effort. There are two types of manufacturers: high and low. Under complete information, high-type manufacturers exert a greater level of social responsibility effort in comparison with the low-type manufacturers. We then show that under incomplete information, high-type manufacturers have an incentive to exert an even greater level of social responsibility effort. Surprisingly, the extent of effort put in by high-type firms cannot be lower and, in some cases, can be strictly higher under incomplete information. |
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