Author(s)

Guangfu Liu ¹, Jingmei Wang ¹

Affiliation(s)

¹ School of Economics and Management, Tongji University, Shanghai, China

Corresponding Author

Guangfu Liu

ABSTRACT

With increasing consumer low-carbon preferences, firms have become motivated to proactively join carbon emission reduction initiatives. We explore the competitive and cooperative relationships between leading and following firms during the active carbon reduction phase, focusing on the effects of consumer low-carbon preferences on inter-firm competition, firm profits, and industry carbon reduction. We constructed a three-stage dynamic game model: leading and following firms decide on their competitive relationship with each other in the first stage, decide on their own carbon emission reduction in the second stage, and compete for sequential output in the third stage. It is found that, firstly, when the level of consumers' low carbon preference is too low or too high, firms choose carbon emission reduction competition relationship, and only when the level of consumers' low carbon preference is at a generally significant level, firms choose carbon emission reduction cooperation; secondly, the unit product carbon emission reduction of the leading firm is higher than the unit product carbon emission reduction of the following firm in emission reduction competition, and converges to the same level as the unit product carbon emission reduction of the following firm in emission reduction cooperation Finally, the emission reduction cooperation can improve the industry output and industry carbon emission reduction, which is beneficial to the industry as a whole. The study provides a theoretical basis for enterprise decision making and government policy formulation.

KEYWORDS

Consumer low-carbon preference, competition and cooperation relationship, game theory

CITE THIS PAPER

Guangfu Liu, Jingmei Wang, How should companies act when faced with increasing levels of consumer preference on low carbon?. Industrial Engineering and Innovation Management (2022) Vol. 5: 1-14. DOI: http://dx.doi.org/10.23977/ieim.2022.051001.

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