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Dynamic optimal control of firms' green innovation investment and pricing strategies with environmental awareness and emission tax

Dongdong Li

Managerial and Decision Economics, 2022, vol. 43, issue 4, 920-932

Abstract: This paper develops a dynamic optimal control model to investigate the effects of consumer environmental awareness and emission tax on firms' green innovation investment and pricing strategies. Our main results show the following: (i) when both consumer environmental awareness and emission tax are present, the firm's reaction to environmental awareness may be non‐monotone, although a higher emission tax always yields higher green innovation investment and price; (ii) competition in an environmentally sensitive market increases the investment of the firm's green innovation; (iii) raising emission tax may be a better policy choice than promoting consumer environmental awareness when the market size is small.

Date: 2022
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