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International audience; An important yet largely unexamined issue is how the interaction between deforestation and pollution affects economic and environmental sustainability.This article seeks to bridge the gap by introducing a dynamic model of pollution accumulation where polluting emissions can be mitigated and the absorption efficiency of pollution sinks can be restored. We assume that emissions are due to a production activity, and we include deforestation both as an additional source of emissions and as a cause of the exhaustion of environmental absorption efficiency. To account for the fact that the switching of natural sinks to a pollution source can be either possible, and in such a case even reversible, or impossible, we consider that restoration efforts can be either independent from or dependent on environmental absorption efficiency, i.e., state-independent versus state-dependent restoration efforts. We determine (i) whether production or deforestation is the most detrimental from environmental and social welfare perspectives, and (ii) how state-dependent restoration process affects pollution accumulation and deforestation policies and the related environmental and social welfare consequences.

False quality claims have recently rocked the automobile industry. To promote customer demand while seemingly complying with regulations, manufacturers may cheat even at the risk of incurring sever...

Recent empirical studies indicate that improvements in product conformance quality exhibit learning-by-doing patterns. We address quality improvement in a competitive duopoly market for partially substitutable products characterized by levels of quality that are not necessarily identical. The products’ quality is described with a hazard rate that can be improved both by accumulating production experience (autonomous learning) and quality improvement efforts (induced learning). Given that defective items are fully reimbursable and the demands exhibit increasing returns to scale, we derive Nash equilibrium pricing and induced learning effort dynamic policies. We show that when the effectiveness of autonomous learning prevails over the effectiveness of efforts in induced learning, equilibrium prices gradually grow over time; the trend is quite the opposite when autonomous learning is less effective than induced learning.

We explore the economic and environmental impacts of market structures (competition or integration at vertical and horizontal levels). We consider a bilateral duopoly consisting of two manufacturers and two retailers in which each manufacturer offers a wholesale price contract to the respective retailer. The manufacturers decide on wholesale prices and abatement efforts concerning pollution emissions related to manufacturing processes, whereas the retailers compete in quantities in the consumer market. To understand the comprehensive effects of market structures on economic competitiveness and environmental sustainability, we examine a measure of eco‐friendly social welfare, which is the ratio of social welfare and environmental pollution. Interestingly, we find that the market structures that have been believed to be more efficient are less efficient from a broader perspective: (1) double marginalization can generate higher eco‐friendly social welfare, and (2) horizontal competition between firms can result in lower eco‐friendly social welfare. Although vertical integration and horizontal competition yield greater social welfare by facilitating more production activities, these market structures often fail to induce sufficient abatement efforts to balance the polluting effect of the large volume, resulting in more significant environmental degradation. We also show that, despite the pollution‐curbing effect, higher emission penalties can result in less eco‐friendly social welfare. They can even curtail the abatement efforts of firms under particular circumstances. When products become more substitutable, the eco‐friendly social welfare can decrease depending upon the market structure.

This research investigates the impact of both horizontal and vertical competition, on the one hand, and strategy types (commitment-based versus contingent-based equilibrium strategies), on the other hand, on the pollution accumulated by two supply chains over time. We consider a two-stage game model where two manufacturers and two retailers are involved in a wholesale price contract, in order to supply the demand over a finite time horizon. In the first stage of the game, the manufacturers set their respective optimal transfer prices. During the second stage, polluting emissions are created over time in proportion with demand, which is controlled by the retailers’ respective consumer prices. In this stage, the manufacturers are involved in emissions abatement. In this setup, we seek to identify the combination of market structure and strategy type that leads the two supply chains to generate the lowest pollution intensity and the highest level of abatement intensity.

This paper investigates how current and future generations are affected by commitment-based Nash equilibrium environmental strategies when the environmental absorption efficiency is susceptible to switch from a pollution sink to a source. We formulate a two-player differential game model of transboundary pollution that includes the environmental absorption efficiency as a state variable that can be enhanced thanks to restoration efforts. Based on a logarithmic specification for the instantaneous revenue function, we characterize the cooperative solution and the commitment-based Nash equilibrium strategy, and examine their differences in terms of steady state and transient behavior. We notably show that a commitment-based Nash equilibrium strategy makes it possible to prevent a definitive switching of the environmental absorption efficiency from a pollution sink to a source but imposes greater economic sacrifices on current generations than on future generations. In comparison, the cooperative solution imposes greater sacrifices on current generations in terms of revenues but it imposes lower environmental costs on both current and future generations than commitment-based Nash equilibrium strategy.

It has been shown that learning-by-doing enables firms to reduce marginal production costs, but that this effect weakens due to organizational forgetting. In order to assess the impact of both learning and forgetting on long-term competitiveness and a firm’s profitability, we model an experience accumulation process with depreciation and consider two competing firms that produce fully substitutable products. In this model, unit production costs decrease with the firm’s experience due to the proprietary learning process as well as the spillover of experience from the competing firm. Firms can either share or hide from each other their information about the state of their respective experience throughout the game. We found that in an equilibrium steady state, if the organizational forgetting is sufficiently large (larger than the spillover rate value), then information sharing, compared to information hiding, results both in less competitiveness and increased profits for firms. Conversely, if the organizational forgetting is small and the spillover opportunities are relatively large, then information sharing promotes both long term competitiveness and firm profits. Accordingly, firms are better off in the long term by deliberately limiting (expanding) their experience accumulation process whenever organizational forgetting is relatively large (small). A high ability of proprietary learning, however, can interfere in this relationship so that limiting the firms’ experience process will always be compatible with higher profitability.

In this paper, we suggest a two-player differential game model of transboundary pollution that accounts for time-dependent environmental absorption efficiency, which allows the biosphere to switch from a carbon sink to a source. We investigate the impact of negative externalities resulting from a transboundary pollution non-cooperative game wherein countries are dynamically involved. Based on a linear-quadratic specification for the instantaneous revenue function, we assess differences related to both transient path and steady state between cooperative solution, open-loop and Markov perfect Nash equilibria (MPNE). Regarding the methodological contribution of the paper, we suggest a particular structure of the conjectured value function to solve MPNE problems with multiplicative interaction between state variables in one state equation, so that third-order terms that arise in the Hamilton–Jacobi–Bellman equation are made negligible. Using a collocation procedure, we confirm the validity of the particular structure of the conjectured value function. The results suggest unexpected contrasts in terms of pollution control and environmental absorption efficiency management: (i) in the long run, an open-loop Nash equilibrium (OLNE) allows equivalent emissions to the social optimum but requires greater restoration efforts; (ii) although an MPNE is likely to end up with lower emissions and greater restoration efforts than an OLNE, it has a much greater chance of falling in the emergency area; (iii) the absence of cooperation and or precommitment becomes more costly as the initial absorption efficiency decreases; (iv) more heavily discounted MPNE strategies are less robust than OLNE to prevent irreversible switching of the biosphere from a carbon sink to a source.

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.

We consider a stock pollution problem where the biosphere can transform from a sink to a source of pollution in the presence of self-regenerating environmental absorption efficiency. We examine the problem of controlling pollution and the capacity of the biosphere to absorb pollution: the regulator can mitigate emissions and can invest to build-up the absorption capacity of pollution sinks. We examine conditions under which both measures, mitigation and absorption capacity investments, are substitute (complement) to each other, and the relative extent to which environmental self-regenerating capabilities affect these conditions. We also exhibit the possibility of an oscillatory approach to the steady state. Particular attention is paid to the situation where the social planner is impatient.

The paper investigates the extent to which capacity investment considerations interact with the double marginalization effect in a simple supply chain governed by a wholesale price contract. To do so, a non-cooperative differential game model is formulated to study the pricing and capacity investment decisions in a supply chain, which consists of a supplier and a manufacturer. In such a game, there are different decision rules—open-loop, closed-loop, feedback—that are available to the supply chain participants, depending on the observability of the current state of the supply chain. While closed-loop and feedback equilibrium strategies involve the observability of other chain member’s production capacity, open-loop equilibrium strategies do not have such requirement. We examine how the supplier and the manufacturer determine, with the different decision rules, their production capacities and pricing policies to maximize their profits over an infinite planning horizon, and determine how the observability of other supply chain’s members’ production capacity affects the magnitude of the double marginalization effect. Our study suggests that the observability of other chain member’s current production capacity entails a lower production efficiency that results in a greater double marginalization effect. This allows us to conclude that observability of other chain member’s current production capacity is associated with a greater double marginalization effect.

We investigate how the relationship between economic growth and pollution is affected by the source of pollution: production or consumption. We are interested in polluting waste that cannot be naturally absorbed, but for which recycling efforts aim to avoid massive pollution accumulation with harmful consequences in the long run. We distinguish the cases where recycling efforts are capital-improving or capital-neutral. Based on both environmental and social welfare perspectives, we determine how the interaction between growth and polluting waste accumulation is affected by the source of pollution, i.e., either consumption or production, and by the fact that recycling may or may not act as an income generator, i.e., either capital-improving or capital-neutral recycling efforts. Several new results are extracted regarding optimal recycling policy and the Environmental Kuznets Curve. Beside the latter concern, we show both analytically and numerically that the optimal control of waste through recycling allows to reaching larger (resp., lower) consumption and capital stock levels under consumption-based waste compared to production-based waste while the latter permits to reach lower stocks of waste through lower recycling efforts.

In the literature on marketing models, the assumption of mixed word-of-mouth has been limited to the Bass diffusion model. Yet explicit leveraging of the originating factors of such assumption is lacking. Apart from that example, mixed word-of-mouth has been disregarded in contagion sales models. This paper bridges the gap by suggesting a sales model, where both positive and negative word-of-mouth affect the attraction rate of new customers, along with advertising. The difference between positive and negative word-of-mouth is based on the distinction between satisfied and dissatisfied current customers, which is supposed to depend on conformance quality. A primary issue in this paper is to determine how a firm should determine the optimal intertemporal trade-off between investing in advertising-dependent word-of-mouth and quality-dependent word-of-mouth. To address this issue, a contagion sales model is suggested where mixed autonomous word-of-mouth alone can lead to either commercial success or failure of a given brand.

The objective of the paper is to study how wholesale price and revenue sharing contracts affect operations and marketing decisions in a supply chain under different dynamic informational structures. We suggest a differential game model of a supply chain consisting of a manufacturer and a single retailer that agree on the contract parameters at the outset of the game. The model includes key operational and marketing activities related to a single product in the supply chain. The manufacturer sets a production rate and the rate of advertising efforts while the retailer chooses a purchase rate and the consumer price. The state of the game is summarized in the firms’ backlogs and the manufacturer’s advertising goodwill. Depending on whether the supply chain members have and share state information, they may either make decisions contingent on the current state of the game (feedback Nash strategy), or precommit to a plan of action during the whole game (open-loop Nash strategy). Given a contract type, the impact of the availability of information regarding the state of the game on the firms’ decisions and payoffs is investigated. It is shown that double marginalization can be better mitigated if the supply chain members adopt a contingent strategy under a wholesale price contract and a commitment strategy under a revenue sharing contract.