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How to subsidize energy efficiency under duopoly efficiently?

Author

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  • Nie, Pu-yan
  • Yang, Yong-cong
  • Chen, You-hua
  • Wang, Zhao-hui

Abstract

Establishing a game theory model, this paper captures the effects of output subsidy on energy efficiency under Cournot competition and Stackelberg competition. Three types of subsidies are considered in the model, namely without subsidy, unilateral subsidy and bilateral subsidy. The findings indicate that firms without subsidy are not willing to improve energy efficiency. Also, subsidy stimulates the subsidized firms’ outputs while deters the outputs of other firms. Meanwhile, the equilibrium subsidy intensity depends on firms’ position. Furthermore, the minimal subsidy budgets under different situations are presented. Especially, given the fixed subsidy budget, the output of the subsidized firm is the highest if this firm plays the leading position. In addition, certain subsidy can reduce the total emission, while overdue subsidy cannot reach the environmental object.

Suggested Citation

  • Nie, Pu-yan & Yang, Yong-cong & Chen, You-hua & Wang, Zhao-hui, 2016. "How to subsidize energy efficiency under duopoly efficiently?," Applied Energy, Elsevier, vol. 175(C), pages 31-39.
    • Handle: RePEc:eee:appene:v:175:y:2016:i:c:p:31-39
    DOI: 10.1016/j.apenergy.2016.04.105
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    11. Yang, Dong-xiao & Chen, Zi-yue & Nie, Pu-yan, 2016. "Output subsidy of renewable energy power industry under asymmetric information," Energy, Elsevier, vol. 117(P1), pages 291-299.
    12. Zi‐rui Chen & Pu‐yan Nie, 2020. "Implications of a cap‐and‐trade system for emission reductions under an asymmetric duopoly," Business Strategy and the Environment, Wiley Blackwell, vol. 29(8), pages 3135-3145, December.
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    More about this item

    Keywords

    Energy efficiency; Subsidy; Duopoly;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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