Post privatization of high-speed rail with corporate social responsibility (CSR) in an international transportation market: Mandatory CSR versus voluntary CSR

Abstract

This study considers an international transportation market wherein a high-speed rail (HSR) firm engaging in corporate social responsibility (CSR) competes with both domestic and foreign airlines with differentiated services. We investigate and compare two CSR types, mandatory CSR, imposed by the government, and voluntary CSR, chosen by the HSR operator, and show that mandatory CSR can be lower or higher than voluntary CSR, depending on the transportation subsidy types offered. With uniform subsidies, mandatory CSR together with a higher subsidy is lower than voluntary CSR, which yields higher profits for domestic firms and higher social welfare, while the opposite result can be found with discriminatory subsidies. We further explore the welfare effect of HSR privatization policies with CSR activities. We find that irrespective of the CSR types and subsidy types, privatization with subsidies always improves social welfare; however, privatization with mandatory (voluntary) CSR improves (reduces) social welfare in the absence of subsidies. These findings suggest that post-privatization with CSR activities may be harmful to society without an appropriately designed subsidy policy and should be monitored by antitrust agencies.