Decentralization or integration: distribution channel selection under environmental taxation

Junsong Bian, Xiaolei Guo, Kevin W. Li*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

This study reveals that the environmental tax gets less stringent when the manufacturer's distribution channel becomes more decentralized. Contrary to the classic double marginalization problem, the first implication is that a monopolistic manufacturer benefits from decentralization when its technology is sufficiently polluting. Secondly, with two competing manufacturers, both are more likely to decentralize in equilibrium when their technologies are more polluting. Under certain conditions, decentralized manufacturers may enjoy higher profits thanks to tax cuts without affecting social welfare or consumer surplus. Various extensions of the base models confirm the robustness of the analytical results.

Original languageEnglish
Pages (from-to)170-193
Number of pages24
JournalTransportation Research Part E: Logistics and Transportation Review
Volume113
DOIs
Publication statusPublished - May 2018

Keywords

  • Channel selection
  • Environmental tax
  • Game theory
  • Supply chain management

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