Optimal production planning and cap setting under cap-and-trade regulation

Ping He (), Guowei Dou () and Wei Zhang ()
Additional contact information
Ping He: South China University of Technology
Guowei Dou: Shenzhen University
Wei Zhang: Zhejiang University

Journal of the Operational Research Society, 2017, vol. 68, issue 9, 1094-1105

Abstract: Abstract This paper investigates the optimal production decisions of a self-pricing manufacturer and the optimal cap-setting decisions of a regulator under the cap-and-trade regulation. The objectives of the manufacturer and the regulator are to maximize profit and to maximize social welfare, respectively. We first derive the optimal production decisions and the corresponding total emissions of the manufacturer, with given parameters of the cap-and-trade regulation. Based on these results, we then solve the optimal cap-setting problem of the regulator. Furthermore, through sensitive analyses, we show that as the emissions intensity (i.e., the emissions generated from one unit of product) increases, both the optimal total emissions and the optimal cap first increase and then decrease.

Keywords: cap-and-trade; production; pricing; emissions intensity; Stackelberg game (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://link.springer.com/10.1057/s41274-016-0123-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jorsoc:v:68:y:2017:i:9:d:10.1057_s41274-016-0123-1

Ordering information: This journal article can be ordered from
http://www.springer. ... search/journal/41274

DOI: 10.1057/s41274-016-0123-1

Access Statistics for this article

Journal of the Operational Research Society is currently edited by Tom Archibald and Jonathan Crook

More articles in Journal of the Operational Research Society from Palgrave Macmillan, The OR Society
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().