Competing Retailers’ Environmental Investment: An Analysis under Different Power Structures

Sustainability issues in supply chains have received increasingly significant concern. Facing incentives such as environmental tax and consumer environmental awareness, firms and even retailers have started to make sustainability investments. To evaluate the retailer’s contribution to sustainability issues, we study a supply chain with one manufacturer and two symmetric competing retailers who have the option to make sustainable investment in their upstream members directly in green technology or clean production. We investigate the optimal sustainable investment and operation decisions under three power structures: (1) firms have the same power (Nash game); (2) the manufacturer is more powerful (Manufacturer-lead Stackelberg game) and (3) the retailers are more powerful (Retailer-lead Stackelberg game). By analyzing the optimal decisions and the economic performances, we show that the retailers always have incentives to make sustainable investment in all power structures. However, the retailers’ power affects firms’ decisions, the economic and the environmental performances. When the investment cost is low, the emission reduction due to investment is the most significant with less powerful retailers. With relatively high investment cost, whether the retailers having more power make more sustainable investment depends on the unit tax saving and effect factor of emission reduction on the demand. From the environmental perspective, simultaneous games may conduct the most significant total emission reduction in most cases. We also consider an asymmetric case and compare it with the symmetric one.

Tax Incidence

According to economic theory, the incidence of a unit tax is independent of the statutory assignment of the liability to pay the tax. However, the theory is silent on the possible effects of market institutions on tax incidence. We report data from an experiment designed to address two questions. Is tax incidence independent of the assignment of the liability to pay tax to sellers or to buyers? Is tax incidence independent of market institutions? We conduct laboratory experiments with double auction (DA) and posted offer (PO) markets. Based on the results of nonparametric and parametric tests of prices generated by laboratory markets, we conclude that the answer to both questions is “no.” We report that observed differences from liability-side equivalence are statistically significant and economically meaningful. We also report that the incidence of the same tax differs between DA and PO markets with the same demand and supply schedules.

Environmental Taxes in Duopoly with Soft Capacity Constraints

This paper examines an environmental tax when duopolistic firms engage in capacity-price competition. Under soft capacity constraints, the equilibrium ranges from Bertrand competition to Cournot competition, depending upon parameters. It is shown that a unit tax potentially changes the qualitative nature of equilibrium. That is, the type of tax affects the mode of competition between firms. This effect gives rise to the result that a unit tax is sometimes an inefficient instrument. The explanation is that the tax that leads to the first-best under Cournot competition will in fact sustain Bertrand competition, and vice versa.

The Combination of Lab and Field Experiments for Benefit-Cost Analysis

This article explores the combination of laboratory and field experiments in defining a welfare framework and the impact of different regulatory tools on consumer behaviors. First, an overview of strengths and weaknesses raised by the experimental literature show that, for food consumption, lab and field experiments may be complementary to each other. The lab experiment elicits willingness to pay useful for determining per-unit damages based on well-informed, thoughtful preferences, while the field experiment determines purchase/consumption reactions in real contexts. Second, the analytical approach suggests how to combine the results of both lab and field experiments to determine the welfare impact of different regulatory tools such as labels and/or taxes. Third, an empirical application focuses on a lab and a field experiment conducted in France to evaluate the impact of regulation on fish consumption. Estimations for the French tuna market show that a per-unit tax on tuna and/or an advisory policy lead to welfare improvements.