143. Green upgrades under emission cap regulation
Invited abstract in session TC-42: Regulations in sustainable supply chains, stream Circular & Sustainable Supply Chains.
Tuesday, 12:30-14:00Room: Newlyn GR.02
Authors (first author is the speaker)
| 1. | Zhiyuan Cao
|
| college of management and economics, tianjin university | |
| 2. | jianxiong zhang
|
| college of management and economics, tianjin university |
Abstract
Driven by emission regulations and the growing trend of environmental awareness, manufacturers are increasingly motivated to implement green upgrades in their products and production processes. However, the lack of market information to these upgrades creates uncertainty about the returns, as manufacturers typically lack direct market access and expertise in demand forecasting. This paper examines how the emission regulation—specifically focusing on emission cap—and asymmetric information about market demand influence manufacturers' green upgrade and pricing decisions. We develop a game model involving a manufacturer and a retailer, where the retailer holds private information about market demand, resulting in a signaling game. Our findings show that the impact of the emission regulation on the manufacturer’s upgrade decisions is non-monotonic. Under perfect information, when the emission regulation is strict, a moderate relaxation of the regulation can promote green upgrades, with this effect further amplified under asymmetric information. Additionally, we find that the retailer's private information benefits the manufacturer. When the retailer observes low market demand, they are incentivized to lower the marginal price to avoid being mimicked. Finally, we observe that asymmetric information increases both consumer surplus and social welfare compared to the symmetric scenario, particularly when the emission regulation is relatively lenient.
Keywords
- Game Theory
- Sustainable Development
- Environmental Management
Status: accepted
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