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Marketable Pollution Permits in Oligopolistic Markets with Transaction Costs

Author

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  • Anna Nagurney

    (Department of Finance and Operations Management, School of Management, University of Massachusetts, Amherst, Massachusetts 01003)

  • Kanwalroop Kathy Dhanda

    (School of Business Administration, University of Portland, 5000 North Willamette Boulevard, Portland, Oregon 97203-5798)

Abstract

In this paper, we present a variational inequality framework for the modeling, qualitative analysis, and computation of equilibrium patterns in multiproduct, multipollutant oligopolistic markets with marketable pollution permits in the presence of transaction costs. The model deals explicitly with spatial differentiation and also guarantees that the imposed environmental quality standards are met through the initial allocation of licenses. An algorithm is proposed, with convergence results, to compute the profit-maximized quantities of the oligopolistic firms' products and the quantities of emissions, along with the equilibrium allocation of licenses and their prices. Numerical examples are included to illustrate this approach.

Suggested Citation

  • Anna Nagurney & Kanwalroop Kathy Dhanda, 2000. "Marketable Pollution Permits in Oligopolistic Markets with Transaction Costs," Operations Research, INFORMS, vol. 48(3), pages 424-435, June.
    • Handle: RePEc:inm:oropre:v:48:y:2000:i:3:p:424-435
    DOI: 10.1287/opre.48.3.424.12429
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    References listed on IDEAS

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    Cited by:

    1. Wang, Zhi, 2003. "WTO accession, the "Greater China" free-trade area, and economic integration across the Taiwan Strait," China Economic Review, Elsevier, vol. 14(3), pages 316-349.
    2. Zugang Liu & Anna Nagurney, 2009. "An integrated electric power supply chain and fuel market network framework: Theoretical modeling with empirical analysis for New England," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(7), pages 600-624, October.
    3. William Chung, 2024. "Truncated Dantzig–Wolfe Decomposition for a Class of Constrained Variational Inequality Problems," Computational Economics, Springer;Society for Computational Economics, vol. 64(1), pages 81-104, July.
    4. Lee, Chia-Yen & Wang, Ke, 2019. "Nash marginal abatement cost estimation of air pollutant emissions using the stochastic semi-nonparametric frontier," European Journal of Operational Research, Elsevier, vol. 273(1), pages 390-400.
    5. Bernard, A. & Haurie, A. & Vielle, M. & Viguier, L., 2008. "A two-level dynamic game of carbon emission trading between Russia, China, and Annex B countries," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1830-1856, June.
    6. Wang, Hua & Zhang, Xiaoning, 2016. "Joint implementation of tradable credit and road pricing in public-private partnership networks considering mixed equilibrium behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 94(C), pages 158-170.
    7. Dao-Li Zhu & Hai Yang & Chang-Min Li & Xiao-Lei Wang, 2015. "Properties of the Multiclass Traffic Network Equilibria Under a Tradable Credit Scheme," Transportation Science, INFORMS, vol. 49(3), pages 519-534, August.
    8. Nguyen, Nga & Shortle, James S., 2006. "Transactions Costs and Point-Nonpoint Source Water Pollution Trading," 2006 Annual meeting, July 23-26, Long Beach, CA 21096, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. He, Fang & Yin, Yafeng & Shirmohammadi, Nima & Nie, Yu (Marco), 2013. "Tradable credit schemes on networks with mixed equilibrium behaviors," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 47-65.
    10. Xiaowei Hu & Peng Li, 2021. "Relief and Stimulus in A Cross-sector Multi-product Scarce Resource Supply Chain Network," Papers 2101.09373, arXiv.org, revised Nov 2022.
    11. Li, Dong & Nagurney, Anna, 2015. "A general multitiered supply chain network model of quality competition with suppliers," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 336-356.
    12. Zugang Liu, 2013. "The co-evolution of integrated corporate financial networks and supply chain networks with insolvency risk," Computational Management Science, Springer, vol. 10(2), pages 253-275, June.
    13. Lee, Kangil & Han, Taek-Whan, 2016. "How vulnerable is the emissions market to transaction costs?: An ABMS Approach," Energy Policy, Elsevier, vol. 90(C), pages 273-286.
    14. Yang, Hai & Wang, Xiaolei, 2011. "Managing network mobility with tradable credits," Transportation Research Part B: Methodological, Elsevier, vol. 45(3), pages 580-594, March.
    15. Tajbakhsh, Alireza & Hassini, Elkafi, 2022. "A game-theoretic approach for pollution control initiatives," International Journal of Production Economics, Elsevier, vol. 254(C).
    16. Wang, Xiaolei & Yang, Hai & Zhu, Daoli & Li, Changmin, 2012. "Tradable travel credits for congestion management with heterogeneous users," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 426-437.
    17. Liu, Zugang & Cruz, Jose M., 2012. "Supply chain networks with corporate financial risks and trade credits under economic uncertainty," International Journal of Production Economics, Elsevier, vol. 137(1), pages 55-67.
    18. Dong Li & Anna Nagurney, 2017. "Supply chain performance assessment and supplier and component importance identification in a general competitive multitiered supply chain network model," Journal of Global Optimization, Springer, vol. 67(1), pages 223-250, January.

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