Coordinating carbon emissions via production quantities: a differential game approach

DOI10.3390/G12010015MaRDI QIDQ2052496zbMATH OpenOpenAlexFDO

Authors Gila E. Fruchter, Hussein Naseraldin

Publication date 26 November 2021

Published in Games (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.3390/g12010015

zbMATH Keywords

centralizeddecentralizeddifferential gamesemissionindustrial parks

Mathematics Subject Classification ID

Differential games (aspects of game theory) (91A23) Applications of game theory (91A80) Environmental economics (natural resource models, harvesting, pollution, etc.) (91B76)

Review text

Summary: Production emissions in the industrial sector are a major source of environmental pollution. In this paper, we explore how emission considerations are integrated with production decisions. We develop a dynamic model consisting of two firms located in the same industrial park, which satisfies exogenously given demands in separate markets. The two firms can build up or rundown stocks (full backlogging), both of which are costly. The emission cost depends on the total output of the two firms. We develop Nash equilibrium feedback strategies, where each firm decides on its output based on its inventory or the inventories of both. We also develop a social planning solution where decisions are centralized. We present the analytic results for the total profits in these settings. The results show the benefits of a decentralized approach over a centralized one, provided there is a mechanism for coordination. Finally, emission costs are compared for the various solution concepts.

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Cites work

• A differential game model of the marketing-operations interface
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Cited in

(5)

• Decomposition method for oligopolistic competitive models with common environmental regulation
• Cost-sharing strategy for carbon emission reduction and sales effort: a Nash game with government subsidy
• Analysis of carbon tax strategy for emission reduction based on differential game theory
• Stochastic Switching Games and Duopolistic Competition in Emissions Markets
• A two-level dynamic game of carbon emission trading between Russia, China, and annex B countries

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