Effects Of Carbon Tariffs On Duopoly Market Entry Decisions And Price Competition

Currently, some developed countries (regulated regions) are considering implementing a controversial climate policy called carbon tariffs. Carbon tariffs would be applied to those products which are produced in developing countries (unregulated regions without carbon tariffs) and exported to developed countries. Studies have shown that the production, export volume and employment rate, etc of industry of developing countries would be greatly influenced by carbon tariffs. Especially for textile firms of developing countries, they emit a lot of carbon emissions and their exports to the developed countries account for a large proportion. Then, carbon tariffs would possibly drive the textile firms of developing countries out of developed-countries market. Therefore, it is extremely significant to study the following questions:(i) the effect of carbon tariffs on the textile firms of developing countries;(ii) the textile firms of developing countries how to react carbon tariffs.The basic thought of this dissertation is described as follows. Firstly, according to the researches about developed countries, the dissertation establishes price competition model for duoply under the scenario wihthout and with carbon tariffs, respectively. Then, this model is solved by a two-stage game. Finally, based on the analysis of equilibrium results, the decisions and coping strategies are offered for the textile firm of developing countries.In order to be close to the reality of the textile firms of developing countries and developed countries, assume that these two firms produce the same type products which are differentiated but partially substituted. Thus, the cost differences of these two firms are considered to establish the price competition model. This model is solved through a two-stage game, where in the first stage each firm chooses its emissions reduction technology and in the second stage each firm decides its price. Based on the scenario without carbon tariffs, the effects of carbon tariffs on the production, profit, profit rate and monopoly power of the textile firm of a developing country are analyzed. Additionally, the effects of carbon tariffs on total carbon emissions and global social welfare are also analyzed in this dissertation.The conclusions of the dissertation indicate that,(â…°) carbon tariffs greatly threat the survival of the textile firm of a developing country in the developed-country market;(â…±) both total carbon emissions and global social welfare are reduced by carbon tariffs;(â…²) the coping strategies for carbon tariffs are that the textile firm of a developing country makes its efforts to choose the appropriate technology for emissions reduction, to reduce its cost of emissions reduction and to narrow the product differences between itself and the textile firm of the developed country.