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Optimal Coordination Strategy for International Production Planning and Pollution Abating under Cap-and-Trade Regulations

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  • Baogui Xin

    (Nonlinear Science Center, College of Economics and Management, Shandong University of Science and Technology, Qingdao 266590, China)

  • Wei Peng

    (Nonlinear Science Center, College of Economics and Management, Shandong University of Science and Technology, Qingdao 266590, China)

  • Minghe Sun

    (Department of Management Science and Statistics, College of Business, The University of Texas at San Antonio, San Antonio, TX 78249-0634, USA)

Abstract

Because both pollution emissions and production policies often are international in scope, it is necessary to find optimal coordination strategies for international production planning and pollution abating. Differential game models are developed for multiple neighboring countries to reach optimal decisions on their production planning and pollution abating under cap-and-trade regulations. Non-cooperative and cooperative differential games are presented to depict the optimal tradeoffs between production planning and pollution abating. Hamilton-Jacobi-Bellman (HJB) equations are then employed to analyze the asymmetric and symmetric feedback solutions. Numerical simulations are used to illustrate the results. Five different dividends are also discussed. With the proposed strategies, more improvement will be directed toward production supplies and environmental issues than ever before.

Suggested Citation

  • Baogui Xin & Wei Peng & Minghe Sun, 2019. "Optimal Coordination Strategy for International Production Planning and Pollution Abating under Cap-and-Trade Regulations," IJERPH, MDPI, vol. 16(18), pages 1-21, September.
    • Handle: RePEc:gam:jijerp:v:16:y:2019:i:18:p:3490-:d:268592
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    References listed on IDEAS

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    Cited by:

    1. Wei Peng & Baogui Xin & Yekyung Kwon, 2019. "Optimal Strategies of Product Price, Quality, and Corporate Environmental Responsibility," IJERPH, MDPI, vol. 16(23), pages 1-24, November.
    2. Hongxia Sun & Jie Yang & Yang Zhong, 2020. "Optimal Decisions for Two Risk-Averse Competitive Manufacturers under the Cap-and-Trade Policy and Uncertain Demand," IJERPH, MDPI, vol. 17(3), pages 1-17, February.

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