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      Retail location competition under carbon penalty

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      Embargo Lift Date: 2020-08-16
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      Author
      Dilek, H.
      Karaer, Ö.
      Nadar, E.
      Date
      2018
      Source Title
      European Journal of Operational Research
      Print ISSN
      0377-2217
      Publisher
      Elsevier B.V.
      Volume
      269
      Issue
      1
      Pages
      146 - 158
      Language
      English
      Type
      Article
      Item Usage Stats
      132
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      27
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      Abstract
      We study the retail location problem in a competitive linear market in which two retailers simultaneously choose their locations. Both retailers procure identical products from a common supplier and each consumer purchases from the closest retailer. Each retailer incurs transportation costs for inventory replenishment from the warehouse and consumer travels to the store. We consider two carbon tax schemes imposed on retailers: for supply-chain-related transportation and for consumer-related transportation. Our analysis indicates that intense competition between retailers leads to a “minimal differentiation” equilibrium, which substantially increases the total system emissions. According to our numerical experiments with realistic parameter values, carbon tax on supply-chain-related transportation does not affect retail location decisions. Carbon tax on consumer transportation, however, may effectively induce the retailers to approach the middle of their respective markets, reducing the total system emissions. Our analysis also indicates that a low carbon price, relative to market profitability, only reduces the total system profit without any effect on emissions. Our findings suggest that the central policymaker avoid a uniform carbon price across different sources of emission and sectors with different characteristics.
      Keywords
      Carbon penalty
      Competition
      Game theory
      OR in environment and climate change
      Retail location
      Permalink
      http://hdl.handle.net/11693/49869
      Published Version (Please cite this version)
      https://doi.org/10.1016/j.ejor.2017.10.060
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      • Department of Industrial Engineering 684
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