Manufacturer’s Encroachment and Carbon Emission Reduction Decisions Considering Cap-and-Trade Regulation and Consumers’ Low-Carbon Preference

Fan Ding, Zhangping Lu, Mengfan Jin () and Licheng Sun
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Fan Ding: Management School, Jiangsu University, Zhenjiang 212013, China
Zhangping Lu: Management School, Jiangsu University, Zhenjiang 212013, China
Mengfan Jin: Department of Architecture, Xi’an Jiaotong-Liverpool University, Suzhou 215127, China
Licheng Sun: Management School, Jiangsu University, Zhenjiang 212013, China

IJERPH, 2022, vol. 19, issue 16, 1-28

Abstract: Carbon emission reduction and achieving carbon neutrality has become an inevitable trend in the sustainable development era. We investigate the manufacturer’s encroachment and carbon emission reduction decisions considering government cap-and-trade regulations and consumers’ low-carbon preference. The equilibrium decisions for the four scenarios are analytically obtained and compared based using the Stackelberg game. A comparison with and without cap-and-trade regulation under two encroachment decisions regarding member’s profits and carbon emission reduction levels are conducted. It is shown that the encroachment decision is always advantageous for the manufacturer if the government decides not to implement cap-and-trade regulation, and the retailer always loses profit. Moreover, if the carbon quota is sufficient, cap-and-trade regulation benefits the manufacturer. Otherwise, the manufacturer’s encroachment decision depends on the appropriate initial unit amount of carbon emission and unit carbon price. The retailer’s profit may not always be hurt by the manufacturer’s encroachment with cap-and-trade regulation; unless the unit carbon price exceeds a certain threshold, a higher consumer’s low-carbon preference in the encroachment scenario reduces more carbon emissions than in the no-encroachment scenario for the manufacturer. Further, the rising platform commission rate causes the platform profit to increase first and then decrease; the platform profit will slightly decrease if both products become more substitutes.

Keywords: manufacturer’s encroachment decision; cap-and-trade regulation; carbon emission reduction; consumers’ low-carbon preference (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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