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The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition

More and more countries employ the Carbon Cap and Trade mechanism (CCT-mechanism) to stimulate the manufacturer to produce much more eco-friendly products. In this paper, we study how the CCT-mechanism affects competitive manufacturers’ product design and pricing strategies. Assume that there are tw...

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Detalles Bibliográficos
Autores principales: Zhang, Linghong, Zhou, Hao, Liu, Yanyan, Lu, Rui
Formato: Online Artículo Texto
Lenguaje:English
Publicado: MDPI 2018
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6266053/
https://www.ncbi.nlm.nih.gov/pubmed/30453588
http://dx.doi.org/10.3390/ijerph15112570
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author Zhang, Linghong
Zhou, Hao
Liu, Yanyan
Lu, Rui
author_facet Zhang, Linghong
Zhou, Hao
Liu, Yanyan
Lu, Rui
author_sort Zhang, Linghong
collection PubMed
description More and more countries employ the Carbon Cap and Trade mechanism (CCT-mechanism) to stimulate the manufacturer to produce much more eco-friendly products. In this paper, we study how the CCT-mechanism affects competitive manufacturers’ product design and pricing strategies. Assume that there are two competitive manufacturers; we give the optimal closed form solutions of the carbon emission reduction rates and retail prices in the Nash game model and the Stackelberg game model with CCT-mechanism, respectively. Additionally, we also discuss the impacts of CCT-mechanism, consumer environmental awareness (CEA), and the sensitivity of switchovers toward price on the optimal carbon emission reduction rates, retail prices, and manufacturers’ profits. We find that (i) when the carbon quota is not enough, there is a trade off between investing in producing much greener product and purchasing carbon quota; when the carbon price is not high, the manufacturer tends to purchase the carbon quota; and when the carbon price is much higher, the manufacturer is more willing to increase the environmental quality of the product; (ii) manufacturer’s size affects product’s emission reduction rate and manufacturer’s optimal profit; larger manufacturer tends to produce much greener product, but it does not mean that he could obtain much more money than the small manufacturer; and (iii) the decision sequence changes manufacturer’s strategies; the optimal emission reduction rate in Nash and Stackelberg game models are almost the same, but the differences of prices and profits between Nash and Stackelberg model’s are much bigger.
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spelling pubmed-62660532018-12-15 The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition Zhang, Linghong Zhou, Hao Liu, Yanyan Lu, Rui Int J Environ Res Public Health Article More and more countries employ the Carbon Cap and Trade mechanism (CCT-mechanism) to stimulate the manufacturer to produce much more eco-friendly products. In this paper, we study how the CCT-mechanism affects competitive manufacturers’ product design and pricing strategies. Assume that there are two competitive manufacturers; we give the optimal closed form solutions of the carbon emission reduction rates and retail prices in the Nash game model and the Stackelberg game model with CCT-mechanism, respectively. Additionally, we also discuss the impacts of CCT-mechanism, consumer environmental awareness (CEA), and the sensitivity of switchovers toward price on the optimal carbon emission reduction rates, retail prices, and manufacturers’ profits. We find that (i) when the carbon quota is not enough, there is a trade off between investing in producing much greener product and purchasing carbon quota; when the carbon price is not high, the manufacturer tends to purchase the carbon quota; and when the carbon price is much higher, the manufacturer is more willing to increase the environmental quality of the product; (ii) manufacturer’s size affects product’s emission reduction rate and manufacturer’s optimal profit; larger manufacturer tends to produce much greener product, but it does not mean that he could obtain much more money than the small manufacturer; and (iii) the decision sequence changes manufacturer’s strategies; the optimal emission reduction rate in Nash and Stackelberg game models are almost the same, but the differences of prices and profits between Nash and Stackelberg model’s are much bigger. MDPI 2018-11-16 2018-11 /pmc/articles/PMC6266053/ /pubmed/30453588 http://dx.doi.org/10.3390/ijerph15112570 Text en © 2018 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
spellingShingle Article
Zhang, Linghong
Zhou, Hao
Liu, Yanyan
Lu, Rui
The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title_full The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title_fullStr The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title_full_unstemmed The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title_short The Optimal Carbon Emission Reduction and Prices with Cap and Trade Mechanism and Competition
title_sort optimal carbon emission reduction and prices with cap and trade mechanism and competition
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6266053/
https://www.ncbi.nlm.nih.gov/pubmed/30453588
http://dx.doi.org/10.3390/ijerph15112570
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