Economics of social value from social enterprise

Abstract

Social enterprise increases social welfare by tackling social problem and creating social value. The purpose of current paper is to examine how social planner induces for-profit firms to be altruistic firms which increases social welfare. In the model, social enterprise maximizes its profit and consumer surplus while social planner maximizes social welfare by providing an incentives for a firm to be a social enterprise. An incentive is based on the difference of prices between two firms. This model is a price competition, and there are three main results through the analysis: (i) there exists such an incentive

(ii) the amount of incentives increases as the market size increases

(iii) the subsidy in accordance with the fixed monopoly price of incumbent firm is efficient, compared to the equilibrium price of incumbent.