Supply Chain Design and Carbon Penalty: Monopoly vs. Monopolistic Competition

Park, S J and Cachon, G P and Lai, G and Seshadri, S (2015) Supply Chain Design and Carbon Penalty: Monopoly vs. Monopolistic Competition. Production and Operations Management.

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Abstract

This paper studies whether imposing carbon costs changes the supply chain structure and social welfare. We explore the problem from a central policymaker's perspective who wants to maximize social welfare. We consider two stakeholders, retailers and consumers, who optimize their own objectives (i.e., profits and net utility) and three competitive settings (i.e., monopoly, monopolistic competition with symmetric market share, and monopolistic competition with asymmetric market share). For the monopoly case, we find that when the retailer's profit is high, imposing some carbon emission charges on the retailer and the consumers does not substantially change the supply chain structure or the social welfare. However, when the retailer's profit is low, imposing carbon costs optimally can lead to a significant increase in social welfare. Moreover, the impact of imposing carbon emission charges becomes more significant when the degree of competition increases. Additionally, the quantum of benefit may depend only on factors common across industries, such as fuel and carbon costs.

ISB Creators:
ISB CreatorsORCiD
Seshadri, SUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Sustainability, Supply Chain Design, Policy Making, Carbon Tax, Monopolistic Competition
Subjects: Operations Management > Supply Chain Management
Depositing User: Ilammaran A
Date Deposited: 05 Apr 2015 07:59
Last Modified: 16 Oct 2015 10:22
URI: http://eprints.exchange.isb.edu/id/eprint/370
Publisher URL: http://dx.doi.org/10.1111/poms.12373
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/1059-1478/
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