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An analysis of EPR incentive design under duopoly differential game

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[[abstract]]As of today, a number of national governments provide a set of economics incentive policiesin order to encourage producers to implement policy of Extended Production Responsibility (EPR).However, among the literature on the effectiveness of economics incentive policies,the research results are inconclusive; besides, they all have discussed the impacts of economics policies in static way. Indeed, with static model considered, the researchers could know even less about the impacts of time lag in cause-and-effect chain which could lead to incorrect information and analysis than viewing the dynamics of the system. So, with both economics incentive and regulation policy tools considered, what are the optimal strategies that the enterprises seek to push themselves toward the successful structures in which they would maximize their profits? This paper utilizes an optimal control theory to formulate a Duopoly Differential Game in which the reaction to competitors is considered, long-term performance of the policy is analyzed, producers' involvement in EPR stimulated by what kind of government policy is discussed, as well as the optimal strategy in business is identified. Our results indicate that, given the driving force for increaing target recycling rate over time, most companies have chosen getting the higher level of Environment Friendly Design to achieve EPR goals in spite of fact that what the optimal pricing strategies are. On the other hand,without setting target recycling rate or with fixed target recycling rate, the producers have little interest in getting the higher level of Environment Friendly Design.

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