An oligopoly model to analyze the market and social welfare for green manufacturing industry

Abstract

As public concerns on sustainable economic development increase, an increasing number of manufactured products have found their environmentally preferable alternatives. In this study, we propose an oligopoly game theoretical model to analyze the competition between the green and ordinary manufacturing sectors. We identify cost efficiency and innovative design as key elements to the survival of green products. We also find that the effectiveness of Pigouvian tax and subsidy policies depend on product characteristics, market structures, as well as targeted results. Our small empirical examples on Corolla vs. Prius and Incandescent lamp vs. Compact fluorescent lamp (CFL) show that our modeling results are more optimistic than real market statistics. We identify pre-equilibrium market dynamics, consumer bias towards green products, and modeling limitations as the main reasons for such differences. We also investigate the market competition and total societal welfare in the presence of tax and subsidy policy intervention. The study results not only provide guidelines and managerial insights for green producers to understand the underlying factors that determine the competitiveness of green products in the market but also benefit policy makers by quantitatively showing the effectiveness of tax and subsidy policies in promoting green products. Keywordsgame theory, oligopoly model, market competition, tax and subsidy, social welfare, sustainable manufacturing Disciplines Industrial Engineering | Systems EngineeringComments NOTICE: This is the author's version of a work that was accepted for publication in Journal of Cleaner Production. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Cleaner Production, 85, December (2014) NOTICE: This is the author's version of a work that was accepted for publication in Journal of Cleaner Production. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Cleaner Production, 85, December (2014), doi: We identify pre-equilibrium market dynamics, consumer bias towards green products, and modeling limitations as the main reasons for such differences. We also investigate the market competition and total societal welfare in the presence of tax and subsidy policy intervention.The study results not only provide guidelines and managerial insights for green producers to understand the underlying factors that determine the competitiveness of green products in the market but also benefit policy makers by * Hu (corresponding author) an Assist...

Low-Content Quantification in Powders Using Raman Spectroscopy: A Facile Chemometric Approach to Sub 0.1% Limits of Detection

“…[29][30][31][32][33][34] A chemometric approach (of which there are many) was preferred because this could be more easily implemented on conventional Raman systems. [35][36][37][38][39][40][41][42][43][44][45][46][47][48][49][50] Morphological weighted penalized least squares (MPLS) 49 was used for baseline correction of Raman spectra because of its inherent simplicity, combined with its flexibility, suitability for automation, and effectiveness at mitigating baseline artefacts. MPLS required neither a priori knowledge nor subjective user intervention, and was reasonably efficient computationally (~5 minutes for 8410 spectra).…”

Analysis of Supply Chain under Different Subsidy Policies of the Government

“…Substituting Equations (A17), (A18) and (A21) into Equation (19), and solving the government's objective function for optimal subsidy rate φ 2 max φ 2 W(φ 2 ).…”

“…Wang et al (2014) studied the effects of the government subsidy on the decisions of members in a supply chain for fashion remanufacturing under the two types of channel structure [18]. Hu et al (2014) investigated the market and social welfare in a green manufacturing industry, and their results showed that the effectiveness of Pigouvian tax and subsidy policies depend on product characteristics and market structures [19]. Raz and Ovchinnikov (2015) considered how a government could coordinate the pricing and supply of public interest goods through government rebates and subsidies [20].…”

“…Substituting Equations (20), (21), and (23) into Equation (19) and obtain social welfare W, and differentiating W with the subsidy φ 2 , we obtain the government's optimal subsidy, which is given by Proposition 6. Proposition 6.…”

“…Previous studies addressed the effects of subsidy policies of the government using game theory [7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22]. Despite the availability of these studies, only a few published articles explored the efficienci-es of subsidy policies of the government using game theory.…”