| dc.description.abstract | Nowadays, many industrial production activities cause large amount of pollutants. In order to solve the problem of environmental pollution, the government usually formulates environmental policies to internalize the externality of pollution, so that polluting manufacturers must pay attention to solving the pollution problems. This paper assumes that in the supply chains, the upstream is a monopoly public firm, and the downstream are two oligopoly private firms. The downstream manufacturers produce one unit of final goods will use one unit of intermediate goods, while the two downstream private firms will produce homogeneous products. Although the production costs of the two downstream private firms are the same, the downstream private firms pay attention to the different degree of pollution. Therefore, the total production cost will vary with different pollution emissions. In addition, because the completely public firms are rare in reality, we will additionally discuss about the optimal intermediate goods price decisions of upstream public firm under different degrees of privatization and how it affects the production decisions of downstream private firms. Based on the above assumptions, a multi-stage game will be constructed.
As the upstream is a completely public firm, the downstream firms produce more pollution, the price of the optimal intermediate goods will be higher, and the pollution tax imposed by the government will be lower. Furthermore, the pollution tax imposed by the government will only affect the individual output of downstream private firms, the more pollution that private firms made, the lower of the private firms individual output produce, which has no impact on the total output and market price of the final product market. Therefore, in the case where the upstream is completely public, the higher of the government pollution tax, the higher of the social welfare.
As the upstream become partially privatized. When the upstream is completely privatized and the optimal pollution tax is greater than zero, the production strategy of individual downstream manufacturers will be determined by the pollution emissions and marginal pollution damage of the downstream private firms. However, when the optimal pollution tax is equal to zero, the more pollution made by downstream, the smaller of the downstream private firms output, the overall of the final product market output will decrease, and the market price will increase, which is harmful to the maximization of social welfare. | en_US |