Corporate Social Responsibility Investment Strategies for Competing On‐Demand Service Platforms

ABSTRACT On‐demand service platforms generally achieve growth by investing in performance or value‐added services. With increasing public concern about platforms' limited corporate social responsibility (CSR) engagement, CSR investment may create new competitive advantages for platforms. However, the effectiveness of CSR investment on platform profitability in competitive markets remains unclear. Therefore, this study develops a duopoly competition model with two horizontally differentiated platforms to explore three scenarios: neither platform invests, both platforms invest, and only one platform invests. The model captures platforms' trade‐off in CSR investment, which not only directly benefits consumers but also indirectly harms them by raising the provider entry barrier and thereby reducing the benefit from cross‐network externality. We find that when consumers' cross‐network externality is high, the investing platform may charge a lower price than its noninvesting rival, as the investment weakens the platform's attractiveness. Under symmetric scenarios, CSR enhances platform profits when platform losses are not sufficiently low. Under asymmetric scenarios, CSR enhances platform profits when investment efficiency is not sufficiently lower than consumers' cross‐network externality. Furthermore, numerical simulations show that CSR investment is a dominant strategy for platforms in most cases. Interestingly, we find that CSR investment may harm consumer surplus, which depends on the interplay between consumers' cross‐network externality and investment efficiency.