Optimal pricing strategy of competing manufacturers under carbon policy and consumer environmental awareness

Abstract

With consideration of consumer environmental awareness (CEA) and upstream competition, this paper investigates the joint pricing strategy of enterprises based on carbon tax and low-carbon subsidy and the design of carbon tax and low-carbon subsidy based on environment goal. Results indicate that both carbon tax and subsidy policy benefit low-carbon products despite different action ways. Analysis of firms’ joint pricing strategy under carbon policy provide a reference for firms’ decision-making adjustments under upstream competition. Carbon policy design strategies help policymakers regulating carbon emissions in industries with upstream competition make policy-making decisions. Further, the comparison of the two policies’ emission reduction efficiency helps policymakers make policy-selection decisions to better avoid certain policy failures. An interesting finding in this paper is that there is a complementary effect between CEA and low-carbon subsidy in reducing carbon emission, policymakers can achieve the environmental goal of minimum carbon emissions with a small subsidy expenditure by promoting low-carbon concepts to raise CEA.