The decision to hire managers in the presence of public and CSR firms

The main aim of this paper is to study the endogenous choice of managerial incentives in a mixed duopoly of one public firm and one Corporate Social Responsibility (CSR) firm. The managerial delegation contract of the public firm includes social welfare and that of the CSR firm takes into account consumer surplus. We show that, in equilibrium, the government (as the owner of the public firm) should always hire a manager and delegate the production decision. However, the CSR firm hires a manager only if the degree of social concern is sufficiently high. Furthermore, adopting these delegation contracts is a better strategy from a social welfare viewpoint.