LAUSR.org creates dashboard-style pages of related content for over 1.5 million academic articles. Sign Up to like articles & get recommendations!

Pricing and Quantity Decisions under Asymmetric Carbon Emission Reduction Information and Cap-and-Trade Mechanism

Photo from wikipedia

With the continuous spread of cap-and-trade mechanisms and consumers’ great concerns about environmental issues, manufacturers strive to reduce carbon emissions. Unfortunately, they are not always willing to disclose their accurate… Click to show full abstract

With the continuous spread of cap-and-trade mechanisms and consumers’ great concerns about environmental issues, manufacturers strive to reduce carbon emissions. Unfortunately, they are not always willing to disclose their accurate emission reductions or may even falsify emission reduction information. By developing a signaling model, we explore the impact of the cap-and-trade mechanism and asymmetric information on the decision-making of supply chain members composed of a manufacturer regulated by the cap-and-trade mechanism, and a retailer. As a result, we show that the low-type manufacturer has the incentive to mimic the pricing behavior of the high-type manufacturer under information asymmetry. Thus, in order to avoid this mimicry, the high-type manufacturer will distort the wholesale price. Moreover, the impact of the cap-and-trade mechanism on the manufacturer depends on the initial quotas. Only when the initial quota is in the middle range does the high-type manufacturer benefit, while the low-type manufacturer suffers. Furthermore, the low-type manufacturer tends to hide emission reduction information, while the high-type manufacturer tends to disclose the information. We also address how information asymmetry weakens the emission reduction advantages of the high-type manufacturer. However, the cap-and-trade mechanism can effectively alleviate this negative effect.

Keywords: information; manufacturer; trade mechanism; cap trade; type manufacturer

Journal Title: International Journal of Environmental Research and Public Health
Year Published: 2023

Link to full text (if available)


Share on Social Media:                               Sign Up to like & get
recommendations!

Related content

More Information              News              Social Media              Video              Recommended



                Click one of the above tabs to view related content.