Decentralization or integration: Distribution channel selection under environmental taxation

Abstract

Taxation 3 Abstract 4 This study reveals that the environmental tax gets less stringent when the manufacturer's 5 distribution channel becomes more decentralized. Contrary to the classic double marginalization 6 problem, the first implication is that a monopolistic manufacturer benefits from decentralization 7 when its technology is sufficiently polluting. Secondly, with two competing manufacturers, both 8 are more likely to decentralize in equilibrium when their technologies are more polluting. Under 9 certain conditions, decentralized manufacturers may enjoy higher profits thanks to tax cuts without 10 affecting social welfare or consumer surplus. Various extensions of the base models confirm the 11 robustness of the analytical results. 12

Channel Structure Strategies of Supply Chains with Varying Green Cost and Governmental Interventions

“…Inspired by the debates on channel structures, this study investigates the channel structure strategy of two competing supply chains (GSC and TSC), considering the green product cost structure and governmental two-way interventions. This study differs from Xing et al [33] and Bian et al [34]. Xing et al [33] emphasized the effect of market size and substitutability of products but did not consider a green product manufacturing cost increase with its green level and governmental intervention.…”

“…This demand function assumption is different from Li and Li [27], in which the prices of competing products are given and the same. This assumption is also different from Bian et al [34], in which consumer demand is assumed to be the function of retail price only and the manufacturer's environmental concerns are expressed in the objective function by assigning a weight to the environmental damage.…”

“…However, green manufacturers will always choose a centralized strategy. The research of Bian et al [34] showed that, unlike the traditional double marginalization effect, a monopolistic manufacturer benefits from the decentralization when the environment is sufficiently polluted by its manufacturing technology. In some cases, decentralized manufacturers can benefit from tax reductions.…”

“…Xing et al [33] emphasized the effect of market size and substitutability of products but did not consider a green product manufacturing cost increase with its green level and governmental intervention. However, Bian et al [34] studied the distribution channel strategies of monopolistic manufacturers and emphasized an environmental tax but no subsidy.…”

“…Moreover, green clothing manufacturers use organic cotton as raw material [46]. This assumption considers the additional cost caused by the improvement of green levels, which is different from most studies such as Zhang et al [17], Li and Li [27], Xing et al [33], and Bian et al [34] where they have assumed that manufacturing cost is a fixed and given parameter. From the above description and analyses, the membership profits of the competing supply chains are as follows:…”