This paper examines the interaction between corporate social responsibility (CSR), network externalities, and vertical organization in a bilateral monopoly. We develop a fulfilled-expectations model in which an upstream manufacturer and a downstream retailer endogenously choose their CSR levels and the timing of their commitments. Positive network externalities induce CSR engagement and, in most organizational configurations, directly determine equilibrium CSR levels. CSR mitigates double marginalization and generates Pareto improvements relative to the no-CSR benchmark by lowering prices and increasing output, firms’ profits, consumer surplus, and social welfare. Among decentralized structures, manufacturer leadership yields the highest CSR engagement and welfare gains and emerges endogenously when the manufacturer unilaterally sets the wholesale price. A vertically integrated benchmark confirms that network effects remain the primary driver of CSR incentives. Finally, allowing bilateral Nash bargaining shows that upstream bargaining power determines CSR adoption, its allocation within the vertical chain, and the endogenous timing of CSR commitments.
