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Pollution accumulation and abatement policy in a supply chain

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  • Ouardighi, Fouad El
  • Sim, Jeong Eun
  • Kim, Bowon

Abstract

This paper seeks to determine how the double marginalization phenomenon affects the tradeoff between polluting emissions and abatement activities related to pollution accumulation in a supply chain composed of one manufacturer and one retailer. The environmental consequence of this inefficiency, which emerges in a non-cooperative vertical setting governed by a single-parameter contract, is overlooked in the literature on pollution control. In the setup of a two-stage game, we investigate the impact of double marginalization for non-cooperative equilibrium. To check whether there are differences between dynamic and strategic effects of double marginalization on pollution accumulation, both the open-loop and feedback Nash equilibria are derived over a finite time horizon, with the cooperative solution as a benchmark.

Suggested Citation

  • Ouardighi, Fouad El & Sim, Jeong Eun & Kim, Bowon, 2016. "Pollution accumulation and abatement policy in a supply chain," European Journal of Operational Research, Elsevier, vol. 248(3), pages 982-996.
    • Handle: RePEc:eee:ejores:v:248:y:2016:i:3:p:982-996
    DOI: 10.1016/j.ejor.2015.08.009
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