The Duopoly Producing Strategy under Carbon Emissions Regulation

We investigate the duopoly producing strategy under carbon emissions including the carbon emissions tax, mandatory carbon emissions capacity and cap-and-trade. We use the game theory to analyze the duopoly manufactories production quantity strategies. Result shows, under each policy, we can find the Nash Equilibrium of two firms' optimal production quantity and expected profit. Specifically, we derive that duopoly market's profit is optimal when implementing the cap-and-trade policy.