Can Tax-Subsidies for Charitable Donations Foster Accessibility to Fresh Goods?

Leveraging government tax incentives to prompt corporate social responsibility (CSR) has gained considerable popularity over the last decade. However, the consequences of such incentives on retailers and society may be subtle. This paper sheds light on the effectiveness of government tax deductions for charitable donations in enhancing society's welfare. We incorporate the U.S. government tax deduction policy for food donations into the retailer's after-tax profit function and analyze the impact of the tax subsidy parameters on the retailer's optimal decisions, corporate charitable giving, and total welfare. The market demand is assumed to be both price- and quality-dependent, and the length of the selling season is characterized by the shelf-life of the goods. The retailer plans not only for the purchase of the goods but also for donating them as a part of her CSR activity. Our study reveals that both donations and (expected) total welfare have a non-monotone relationship with quality and the enhanced tax deduction. For instance, when retailer's inventory is categorized as medium or high quality, increasing tax-subsidy may diminish charitable donations, underscoring the importance of maintaining the delicate balance in the retail market