A Distributional Robust Analysis of Buyback and Cap-and-Trade Policies

Mahnaz Fakhrabadi () and Leif Sandal ()
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Mahnaz Fakhrabadi: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/mahnaz-fakhrabadi/

No 2024/5, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: This study delves into a dynamic Stackelberg game comprised of a manufacturer and a retailer, operating in an environment with fluctuating demand and price-dependent consumer behavior. The multi-period optimization challenges the manufacturer to strategically set wholesale and buyback prices, while the retailer determines the retail price and order quantities within a single contract. In this dynamic framework, the players operate under the constraints of a cap-and-trade policy, with limited knowledge of demand distributions, characterized only by mean and standard deviation parameters. To address this inherent uncertainty, we employ a distributionally robust approach. Additionally, we explore the enduring effects of historical decisions on present-day demand, reflecting a memory-like market behavior. Through numerical examples, we illuminate the influence of buyback contracts and cap-and-trade policies on decision-making processes within this setting.

Keywords: Cap-and-Trade Policy; Multi-Period Stackelberg Game; Distributional-Robust Demand; Single Contract; Buyback Contract; Sustainability (search for similar items in EconPapers)
JEL-codes: C61 C62 C63 C72 C73 D81 Q52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-02-20
New Economics Papers: this item is included in nep-com and nep-gth
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