Profit Surplus Research Articles

Managing green house gas emission cost and pricing policies in a two-echelon supply chain

Reduction of green house gas (GHG) emission is becoming a vital issue to protect our environment. In this point of view, industrial firms’ managers have to consider the cost of emissions trading in their policies to control GHG emission as almost all developed and developing countries of the world are now implementing some norms and penalty for GHG emission. The present article deals with a manufacturer–retailer supply chain model where cost of GHG emission during manufacturing process is taken into account. The profit functions of decentralized and centralized models are analyzed and compared considering emissions trading schemes. This study suggests to the manager of manufacturing firm who may apply two policies, shortages and adjustment of wholesale price, to reduce GHG emission. Although both policies are beneficial for GHG trading, the manufacturer prefers to allow shortages while the retailer prefers the other. Revenue sharing contract and asymmetric Nash bargaining strategy are used to resolve channel conflict and to share surplus profit between the channel members. Finally, a numerical example is presented to validate the proposed model.

Analyzing structure of two-echelon closed-loop supply chain for pricing, quality and recycling management

This paper analyzes the effects of recycling and product quality level on pricing decision in a two-echelon closed-loop supply chain (CLSC), where demand is sensitive with price and quality level of the product. Under Stackelberg game setting, this paper considers three possible collection activities of used product for recycling, viz, retailer led collection, manufacturer led collection and third party led collection. It is found that third party's involvement in used product collection activity is always disadvantageous. In this proposed model, cost parameters of the reverse channel play an important role in determining best channel structure. Quality level and price of the product directly vary with recycling. A threshold of collection effort determines which party between manufacturer and retailer can provide the best quality product at least price. To resolve channel conflict and to distribute surplus profit, the concepts of sub-game perfect equilibrium and alternative offer bargaining strategy are used. The analysis reveals that the subgame perfect equilibrium retail price cuts out channel conflict and depicts particular profit split irrespective of the offering party. The proposed model is also justified by illustrating numerical examples.

Coercive commodities and the political economy of involuntary consumption: The case of the gambling industries

Coercive commodities are those goods and services that promote ‘akratic’ consumption – that consumption recognised by consumers themselves to be contrary to their own best interests, all things considered. The production of coercive commodities has become an increasingly significant economic project of fractions of the capitalist class. As a form of secondary exploitation, coercive commodities facilitate the extraction of surplus profits from the savings and assets of the working classes, thus impeding the accumulation of a workers’ hoard that may act as a potential blockage to value realisation in consumption. We use the example of commercial gambling to illustrate the political economy of coercive commodity production. The gambling production system is driven by a core dynamic between spatially fixed capital, the pressures of competition, and the technological generation of akrasia. The geographical expression of this dynamic is determined by the contingencies of the ‘harm maximisation’ policies of the state and the political efforts of individual capitalists to gain and reproduce monopoly power. Gambling production is effective as a form of secondary exploitation because, in addition to the profits accrued by exploiting labour, it extracts surplus profits by diverging sale price from value, by harnessing monopoly power, and by increasing the volume of consumption through akrasia. It is this extractive power, amplified by the consumer credit system, that forms the basis of the systemic utility of coercive commodities in late capitalist economies.

Two-Stage Coordinated Operational Strategy for Distributed Energy Resources Considering Wind Power Curtailment Penalty Cost

The concept of virtual power plant (VPP) has been proposed to facilitate the integration of distributed renewable energy. VPP behaves similar to a single entity that aggregates a collection of distributed energy resources (DERs) such as distributed generators, storage devices, flexible loads, etc., so that the aggregated power outputs can be flexibly dispatched and traded in electricity markets. This paper presents an optimal scheduling model for VPP participating in day-ahead (DA) and real-time (RT) markets. In the DA market, VPP aims to maximize the expected profit and reduce the risk in relation to uncertainties. The risk is measured by a risk factor based on the mean-variance Markowitz theory. In the RT market, VPP aims to minimize the imbalance cost and wind power curtailment by adjusting the scheduling of DERs in its portfolio. In case studies, the benefits (e.g., surplus profit and reduced wind power curtailment) of aggregated VPP operation are assessed. Moreover, we have investigated how these benefits are affected by different risk-aversion levels and uncertainty levels. According to the simulation results, the aggregated VPP scheduling approach can effectively help the integration of wind power, mitigate the impact of uncertainties, and reduce the cost of risk-aversion.

The impact of natural gas price control in China: A computable general equilibrium approach

This paper depicts the natural gas price control behavior of the Chinese government in an imperfect competition market structure using a static CGE model. It simulates the effect of changes in natural gas price control policy on carbon emission, and the economic effects in view of demand side and supply side. Based on the above, we also analyze the carbon emission mechanism from economic and energy structure perspective. The results show that: an increase in natural gas price can reduce carbon emission, or tends to cause a long-term decline in the surplus profit rate of the natural gas industry. Moreover, the increase in natural gas price may raise the CPI, and reduce actual GDP and residents’ welfare. On the contrary, a decrease in natural gas price may reduce CPI and enhance resident welfare. However, the long-term actual GDP will not increase, but carbon emission will increase and the surplus profit rate of the natural gas industry may reduce in the short term and increase in the long term. On the other hand, Both increase and decrease in natural gas prices may result in a decrease of the actual GDP level in the long term. The elimination of price control in natural gas supply may increase actual GDP and residents’ welfare and reduce CPI. Meanwhile, it may increase carbon emissions and improve the profitability of the natural gas industry.

INVESTMENT MODEL OF DEVELOPMENT UNDER UNCERTAINTY

Uncertainty today is becoming a major factor hampering investment and economic development in Ukraine. Meanwhile, economic theory actually replaces the immeasurable uncertainty with measurable risk, assuming knowledge of probabilities. More complete consideration of the uncertainty factor can become the theoretical basis for the development of entirely other practical recommendations for economic policy at the national and regional levels. Therefore, the purpose of the article is to reveal the possibility of more fully taking into account the uncertainty factor in economic theory and to justify, from these theoretical positions, an alternative approach to managing the process of economic development. The essence of the problem lies in the fact that investment requires a surplus profit, designed to compensate for the uncertainty of investment expectations. Only in the case of such expected compensation, the investment project is able to become the limit, closing, and therefore, the one that determines the total investment. Compensatory superprofit is the most important regulator of economic growth, since investing in a business project occurs only when at least one entrepreneur expects such profits from him. Without it, monetary capital will remain in the banks, and economic development can stop. An important conclusion about the merits of the proposed investment system is that it can be involved not only at the national level, but also at the regional or even city levels. This model is well aligned with other variants of institutional reforms proposed in the literature, for example, with the proposal to create agencies for regional development. Thus, the practical conclusion is the possibility of using the system of redistribution of uncertainty in the specific conditions of the modern Ukrainian economy.

Coordinating a socially responsible closed-loop supply chain with product recycling

This paper analyzes the effects of corporate social responsibility (CSR) and explores channel coordination in a socially responsible manufacturer-retailer closed-loop supply chain (CLSC) by considering two areas – profit maximization and social responsibility through product recycling. The manufacturer is socially responsible and exhibits it by recycling of used product that it collects through the retailer using the reverse channel. It is found that the channel's non-profit maximizing motive through CSR practice generates higher profit margin than the profit maximizing objective and revenue sharing contract resolves channel conflict. Recycling is a key factor for the wholesale price and hence pure profit of the manufacturer because variation of it may lead to decrement or increment even negative wholesale price. Thus, there must be a limit of recycling for optimal benefit. For best channel performance the manufacturer provides the retailer all revenues that it generates through recycling in the form of reward. Thus, CSR is purely a costly endeavor to the manufacturer. Moreover, unlike the pure profit maximizing supply chain CSR has the ability to vary surplus profit share.

A profit sharing scheme for distributed energy resources integrated into a virtual power plant

Independent owners of distributed energy resources (DERs) can be integrated to form a coalition in order to trade in either retail markets (under predetermined tariffs) or wholesale markets using the virtual power plant (VPP) concept. The consequent coordinated operation of DERs entails a surplus profit in respect to the summation of their individual profits. In this paper, the reasons behind such a surplus profit are evaluated. The transactions virtually taken place inside the coalition are defined, classified and priced in order to provide a profit sharing scheme for the integrated DERs. The VPP dispatching center can implement this scheme for trading in both energy and reserve markets, as well as under both dual and single pricing systems in the balancing (real-time) market. This study shows that how the amount and price of the internal transactions in each class, and as a result, the allocated profits depend on the difference between sale and purchase prices in real-time and the risk-aversion level of DERs facing the uncertainties. The proposed framework is compared with the existing cooperative Game theory-based methods. The comparison shows that it has a much lower computational burden. It is also more comprehensible and more acceptable to DER owners.

Risk Assessment of Virtual Power Plants Offering in Energy and Reserve Markets

Distributed energy resources (DERs) can be integrated into a single entity, namely, virtual power plant (VPP). The integration enables them to participate in competitive wholesale electricity markets. According to the different types of uncertainty faced by different DERs, this integration can also act as a risk-hedging mechanism providing a surplus profit. In this paper, using a two-stage stochastic programming approach, risk-averse optimal offering model for a VPP trading in a joint market of energy and spinning reserve service is presented. The conditional value-at-risk (CVaR) is used to control the risk of profit variability. Uncertainties involved in generation of renewables, consumption of loads, calls for reserve service, as well as prices in the day-ahead market, the spinning reserve market (RM) and the balancing (real-time) market (BM), are taken into consideration. This paper assesses how total and surplus profits of VPP are affected by risk-aversion, participation in the RM, and the pricing system in the BM. For this purpose, the role of the integration and the trends of energy and reserve transactions under both single and dual pricing systems in the BM are addressed in detail through a numerical study.

Two paradoxes with one stone: A critical reading of ecological modernization

The current contribution aims at critically reviewing state initiatives in the frame of ecological modernization under the lenses of the labor theory of value. Further, the article addresses two phenomena related to ecological modernization that have received much attention, namely, the Porter Hypothesis and the Jevons' Paradox. State-led environmental regulation in terms of environmental legislation as well as initiatives to promote green technology can be understood as a twofold attempt, which ultimately leads to re-defining socially necessary labor time. First, state intervention would wish to remove surplus profit from polluting or resource depleting capitals through legislation, which would tend to increase socially necessary labor time in the branch of production under reference. State policy might then attempt to propel the adoption of green technology, which would tend to decrease socially necessary labor time in the sectors targeted. Through state initiatives, competition among rival capitals would be re-aligned so as to allow for conditions of production to be renewed. The Porter Hypothesis can be approached as a strategy followed by individual capitals to gain an early-mover advantage, while the Jevons' Paradox can be seen as the result of an imitation process, when rival capitals take up technological modifications launched by innovators.

‘Surplus Profits’ and Progressive Land Ownership: A Marxist Perspective

Firstly I outline Shan Turnbull’s idea of businessmen earning ‘surplus profits’ on their investments, like a shopping centre, and how potentially the use of progressive forms of land ownership may eliminate, or capture, these ‘surplus profits’ to the advantage of the local community. Next I explain Marx’s view of how profit is produced and distributed in our capitalist economy. This allows us to see how Turnbull’s ‘surplus profits’ are no better or worse ethically than profit in general under capitalism. I then focus on how Marx imagines the value of fixed capital is determined and how it can, or crucially cannot, return to the capitalist in money, a non-fixed form of value. Finally I return to the question of the potential usefulness of alternative progressive forms of land ownership to local communities, now guided by Marx’s framework of how value and profit are produced and distributed in our capitalist society.

Rational corporation meets disciplined worker: The (re)production of class subjects in corporate crime law reform

This paper uses Canada’s corporate criminal liability legislation as an empirical exemplar with which to interrogate the limits of using the law to address the abuses of corporate power and to protect workers’ safety. The author draws from Althusser’s notion of interpellation to contemplate whether demands to discipline corporations through the law, particularly by labour/unions, misrecognise the problems of workplace safety, including that workers are routinely injured and killed in the pursuit of surplus profits. The author concludes that the problems of workplace safety ultimately demand broader strategies that challenge and transform the capitalist mode of production.

Channel coordination and profit distribution in a social responsible three-layer supply chain

This paper analyzes coordination of a manufacturer–distributer–retailer supply chain, where the manufacturer exhibits corporate social responsibility (CSR). In manufacturer-Stackelberg game setting, the paper proposes a contract-bargaining process to resolve channel conflict and to distribute surplus profit among the channel members. The contract-bargaining process consists of two wholesale price discount-Nash bargaining. One between the distributer and the retailer based on the outcome of that between the distributer and the manufacturer. Although the contract-bargaining process cuts out channel conflict and distributes surplus profit, the wholesale prices are quite different from those of a pure profit maximizing supply chain. The wholesale price of the manufacturer is less than its marginal production cost above a threshold of CSR. Even it is negative for the manufacturer׳s heavy CSR practice. So, the manufacturer׳s profit may be negative. The behavior of the wholesale price of the distributer is same as that of the manufacturer but for higher threshold of CSR.

Three-echelon supply chain coordination considering duopolistic retailers with perfect quality products

This paper explores channel coordination and profit division issues of a manufacturer–distributer–duopolistic retailers supply chain for a product, where the manufacturer supplies lotsize of the product that contains a random portion of imperfect quality item. In manufacturer-Stackelberg vertical game setting, the duopolistic retailers׳ three behaviours – Cournot, Collusion and Stackelberg are discussed. Besides analyzing the effect of imperfect quality product on optimal decisions, the paper depicts the hybrid contract mechanism so that all units quantity discount with franchise fee resolves channel conflict though unable to provide win–win outcome. For surplus profit division, the paper proposes two sequential bargaining processes- backward and forward, where outcome of a Nash bargaining is dependent on the previous. It is found that, for channel coordinated win–win profit, the manufacturer prefers Collusion, Stackelberg and Cournot, while the retailer prefers the reverse and both prefer backward sequential bargaining. But, the distributers preference depends on the target profit that it sets during the bargaining process. The proposed mechanisms are illustrated by a numerical example.

Managing a two-echelon supply chain with price, warranty and quality dependent demand

AbstractThis paper deals with a two-layer supply chain composed of one manufacturer and one retailer for single-type product. The demand function of the end customers depends on quality, warranty, and sales price of the product. The profit functions of the manufacturer and the retailers are maximized under centralized and decentralized approaches. Our study suggests that the joint profit in centralized system is always more than the decentralized system. Finally, the surplus profit in centralized system is shared according to their profits in decentralized system.

Foundations of a Marxist Theory of the Political Economy of Information: Trade Secrets and Intellectual Property, and the Production of Relative Surplus Value and the Extraction of Rent-Tribute

The aim of this article is to sketch a preliminary outline of a Marxist theory of the political economy of information. It defines information as a symbolic form that can be digitally copied. This definition is purely formal and disregards epistemological, ideological, and functional aspects. The article argues that the value of information defined in this sense tends to zero and therefore the price of information is rent. However, information plays a central role in the production of relative surplus value on the one hand, and the distribution of the total social surplus value in forms of surplus profits and rents, on the other. Thus, the hegemony of information technologies in contemporary productive forces has not made Marx’s theory of value irrelevant. On the contrary, the political economy of information can only be understood in the light of this theory. The article demonstrates that the capitalist production and distribution of surplus value at the global level forms the foundation of the political economy of information.

Risk-based profit allocation to DERs integrated with a virtual power plant using cooperative Game theory

Distributed energy resources (DERs) play a key role in the deregulated power systems with environmental concerns. Their scales and the uncertainty pertaining to intermittent generation of renewable resources are the major challenges of participating in wholesale electricity markets. The concept of virtual power plant (VPP) makes their integration possible and also allows covering the risk due to uncertainties. It yields a surplus profit in comparison to profits made by uncoordinated DERs. In this paper, using a novel stochastic programming approach, the participation of a VPP in the day-ahead market (DAM) and the balancing (real-time) market (BM) is considered. The uncertainties involved in the electricity price, generation of renewables, consumption of loads, and the losses allocation are taken into account. The desired risk-aversion level of each independent DER owner is used to compute the conditional value-at-risk (CVaR) as a well-known risk measure. The role of each DER in covering the risk and making the total profit is evaluated. The Nucleolus and the Shapley value methods as the cooperative Game theory approaches are implemented to allocate VPP's profit to the DERs. The results of a numerical study are presented and concluded.

Corporate social responsibility, channel coordination and profit division in a two-echelon supply chain

This paper deals with coordination and profit division in a manufacturer–retailer supply chain with corporate social responsibility (CSR). Considering the retailer to be socially responsible in one case, and the manufacturer to be so in another, the paper applies a quantity discount contract to resolve channel conflict. It is found that the retailer's perfect welfare maximizing motive is enough for channel coordination. When a channel member is not the perfect welfare maximizer, a quantity discount contract cuts out channel conflict. The wholesale price of a quantity discount contract is different from that of a traditional profit maximizing supply chain. It may be equal to the manufacturer's decentralized wholesale price in one case, and negative for CSR above a certain threshold in another. Also, the manufacturer's pure profit may be negative if it puts a heavy weight on CSR. Using the Nash bargaining product, the surplus profit is divided between the channel members. It is found that, for pure profit, a channel member always prefers the other members to be corporately socially responsible.

Investment under duality risk measure

One index satisfies the duality axiom if one agent, who is uniformly more risk-averse than another, accepts a gamble, the latter accepts any less risky gamble under the index. Aumann and Serrano (2008) show that only one index defined for so-called gambles satisfies the duality and positive homogeneity axioms. We call it a duality index. This paper extends the definition of duality index to all outcomes including all gambles, and considers a portfolio selection problem in a complete market, in which the agent’s target is to minimize the index of the utility of the relative investment outcome. By linking this problem to a series of Merton’s optimum consumption-like problems, the optimal solution is explicitly derived. It is shown that if the prior benchmark level is too high (which can be verified), then the investment risk will be beyond any agent’s risk tolerance. If the benchmark level is reasonable, then the optimal solution will be the same as that of one of the Merton’s series problems, but with a particular value of absolute risk aversion, which is given by an explicit algebraic equation as a part of the optimal solution. According to our result, it is riskier to achieve the same surplus profit in a stable market than in a less-stable market, which is consistent with the common financial intuition.

Cooperative game analysis of retail space-exchange problems

We analyze retail space-exchange problems where two or more retailers exchange their excess retail spaces to improve the utilization of their space resource. We first investigate the two-retailer space exchange problem. In order to entice both retailers with different bargaining powers to exchange their spaces, we use the generalized Nash bargaining scheme to allocate the total profit surplus between the two retailers. Next, we consider the space-exchange problem involving three or more retailers, and construct a cooperative game in characteristic function form. We show that the game is essential and superadditive, and also prove that the core is non-empty. Moreover, in order to find a unique allocation scheme that ensures the stability of the grand coalition, we propose a new approach to compute a weighted Shapley value that satisfies the core conditions and also reflects retailers’ bargaining powers. Our analysis indicates that the space exchange by more retailers can result in a higher system-wide profit surplus and thus a higher allocation to each retailer under a fair scheme.