Incentive Mechanism for Green Design with Consideration of Consumer Behaviors
Date Issued
2015
Date
2015
Author(s)
Chi, Bo-Han
Abstract
We propose an incentive mechanism to increase the demand quantities of green products and present two Stackelberg models to describe two different policy instruments, i.e. a condition that the government compensates green firms with subsidy fees and a condition that the government compensates green customers with subsidy fees. Moreover, we consider two probability distributions of customers’ taste parameters in each model. We examine the results of two models with two different probability distributions to find a suitable model to predict actual demand quantities in our experiment. In the subsidy-to-customer condition, customers buying green products, called green customers, receive subsidy fees from the government. We add a behavioral parameter for non-green customers to describe a loss that they do not receive subsidy fees like green customers. In addition, we conduct a validation experiment to show that the model with the behavioral parameter captures the behaviors of customers.
Subjects
incentive mechanism
green design
game theory
behavioral operations management
experimental economics
Type
thesis
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