ABSTRACT Firms commonly implement cause marketing (CM) to attract customers to purchase their products. This study introduces a two‐stage simultaneous game model to examine the CM decisions of two firms offering substitute products of varying quality, while taking into account the prosocial preference of consumers. The research demonstrates that implementing CM can trigger a warm glow effect among prosocial consumers. Firms have the ability to adjust the intensity of this effect through their pricing and donation strategies. However, the costs associated with CM implementation play a significant role in shaping firms' decisions and may give rise to a prisoner's dilemma situation. Nevertheless, an evaluation of CM practices in e‐commerce firms indicates that the adoption of CM can be mutually beneficial for both firms, ultimately enhancing social welfare in specific scenarios.
Wu et al. (Thu,) studied this question.