Marketplace or reselling: the pricing decisions and face value of the coupons under the Cap‐and‐Trade regulation

Abstract

AbstractThis paper considers a manufacturer selling his products with the marketplace or the reselling mode under the cap‐and‐trade regulation. Coupons are allocated when selling the products. We explore the optimal decisions, the selection and the coordination with the two modes. First, we analytically find that the increase of the cap and platform power (commission rate) increases (decreases) the total production quantity and the optimal production quantity for coupon‐sensitive consumers, and interestingly find that it reduces (increases) the production quantity for coupon‐insensitive consumers when the sensitivity of the coupons is high. Furthermore, the optimal profit of the manufacturer first increases and then decreases with the cap when the emission intensity is low, and it increases with the cap when the emission intensity is high. Second, the marketplace mode creates more (less) profits for the manufacturer if the order‐fulfillment cost is low (high). Whether the marketplace mode or the reselling mode will generate more carbon emission depends on the commission rate and the platform power. Finally, the marketplace mode is not capable of coordinating the manufacturer and the platform at all times, while the reselling mode can coordinate the two firms after considering a coupon‐sharing contract under considerable platform power, and they can achieve Pareto improvement with a two‐part tariff contract under the generalized Nash bargaining framework.