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Investigating cooperation between competitive manufacturers under the energy performance contracting mechanism

Author

Listed:
  • Wenjie Zhang

    (Guangxi Minzu University)

  • Lingling He

    (Southwest Jiaotong University)

  • Jing Liu

    (Guangzhou University)

  • Hongping Yuan

    (Guangzhou University)

Abstract

In a duopoly market, a superior manufacturer owns more efficient energy-saving technology in production than the inferior manufacturer. To improve the efficiency of energy-saving technology, technical cooperation is a critical option for the inferior manufacturer. However, unaffordable cooperation fees are generally regarded as one of the most significant barriers in technological advancement. To address this issue, this paper investigates cooperation between competitive manufacturers under the energy performance contracting (EPC) mechanism by developing game theoretical models. The findings show that (i) when both manufacturers engage in EPC cooperation, the market equilibrium price decreases and overall market product sales increase. (ii) The EPC cooperation decisions of the two manufacturers depend on the market size and the revenue sharing ratio. (iii) When the market is small, the optimal choice of the inferior manufacturer is to engage in EPC cooperation with the superior manufacturer. (iv) When the superior manufacturer retains part of its technology under EPC, there exists an optimal level of technical cooperation that can yield optimal benefits for both manufacturers. The findings are valuable not only in understanding competitive manufacturers’ optimal cooperation decisions under the EPC mechanism but also for inferior manufacturers seeking cooperation opportunities for technological advancement.

Suggested Citation

  • Wenjie Zhang & Lingling He & Jing Liu & Hongping Yuan, 2023. "Investigating cooperation between competitive manufacturers under the energy performance contracting mechanism," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(12), pages 14033-14061, December.
    • Handle: RePEc:spr:endesu:v:25:y:2023:i:12:d:10.1007_s10668-022-02643-6
    DOI: 10.1007/s10668-022-02643-6
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    References listed on IDEAS

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