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Research on energy efficiency improvement in a supply chain with discontinuous market demand

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Abstract

In many countries, products are divided into several grades according to their energy efficiencies by the government. It leads to the discontinuous market demand for the products with different governmental energy efficiency certifications and further influences the relevant strategies of firms. Considering both increasing consumer environmental awareness and strict governmental grading standard, this paper develops a Stackelberg differential game between a manufacturer and a retailer. The optimal pricing strategies and the energy efficiency efforts are studied, and the influences of discontinuous market demand on those optimal strategies are discussed. The results show that the governmental grading standard has an important boosting impact on the energy efficiency level of products. When the product’s energy efficiency level is lower than the governmental standard, the manufacturer will make great efforts on energy efficiency improvement. It would be beneficial for both the manufacturer and the retailer to use penetration pricing strategy during this period. Once the governmental standard is met, the manufacturer will reduce his effort significantly. At this time, taking the skimming pricing strategy is beneficial for both the manufacturer and the retailer. Moreover, a higher governmental standard and a larger consumers’ preference difference can motivate the manufacturer to work harder to improve energy efficiency. They also lead to a higher price after the product is certified as the high energy efficiency product by the government.

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Funding

This work was supported in part by the Youth Fund of MOE (Ministry of Education in China) Project of Humanities and Social Sciences (Project No.20C10288009), in part by the Fundamental Research Funds for the Central Universities under Grant 30919013229, in part by the National Natural Science Foundation of China under Grant 61901105, and in part by the Natural Science Foundation of Jiangsu Province under Grant No. BK20190343.

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Authors and Affiliations

  1. School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China

    Yafei Zu

  2. School of Business, Anhui University of Technology, Ma’an Shan, China

    Xiangfei Zeng

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  1. Yafei Zu
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  2. Xiangfei Zeng
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Correspondence to Yafei Zu.

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Zu, Y., Zeng, X. Research on energy efficiency improvement in a supply chain with discontinuous market demand. Environ Sci Pollut Res 27, 15537–15551 (2020). https://doi.org/10.1007/s11356-020-08080-0

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