Title: The production strategy for two products considering stochastic demand under cap-and-trade regulation

Authors: Hua He; Changsong Ma

Addresses: School of Business Planning, Chongqing Technology and Business University, Chongqing, China ' Logistics Research Institute, Tian Fu College of SouthWestern, University of Finance and Economics, Chengdu 610051, China

Abstract: This paper deals with a production model involving one manufacturer who produces two products. One product adopts green technology and we term the product as 'green' product, and the other product, with regular production technique, termed 'regular' product. In this paper, we formulate models to examine the impact of production for two products under cap-and-trade policy. Analytical results are obtained: with cap-and-trade policy, the manufacture's maximum quantity for product 1 and product 2 is lower than the case without carbon emission constraint, and the expected profit of the manufacturer under this situation depends on initial allowance. To cope with the increasing awareness of environmental protection, firms are required to apply some green technologies to produce 'greener' products. General economics concepts are achieved. That is, the green technology input could improve the manufacture's normal product quantities and expected profit to some degree.

Keywords: two products; cap-and-trade; stochastic demand; production strategy.

DOI: 10.1504/IJIMS.2018.090589

International Journal of Internet Manufacturing and Services, 2018 Vol.5 No.1, pp.38 - 50

Received: 23 Mar 2017
Accepted: 14 Sep 2017
Published online: 22 Mar 2018 *

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