ABSTRACT
In Friedman's view, managers who pursue broader social goals - say, by adopting more stringent emission standards and required by law, or by donating corporate funds to charitable organizations - are simply spending other people's money. Firms run by these managers will have higher cost than those run by managers whose goal is to maximize shareholder wealth. Firms can guarantee their products, for example, or they can develop public reputations for supplying high-quality. The commitment model challenges this account by showing that many people have come to develop a taste for socially responsible behavior. People with such a tasteful prefer dealing with socially responsible firms even when they realize that their own purchases are too small to affect the outcomes they care about. The socially responsible firm is better able than its opportunistic rivals to solve commitment problems that might arise with employees, with customers, and with other firms.
