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Allocation of emission permits using DEA-game-theoretic model

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Abstract

This paper discusses schemes for allocation of emission permits (AEP) among a group of manufacturing companies, aiming at controlling the total emissions of the group while maintaining efficient production. Game theory and data envelopment analysis have been integrated in different ways for constructing two variants of AEP models. The first situation is where all members in the group are cooperative and a reasonable permit allocation scheme maximizes the overall payoff of the group. The second situation is where group members are non-cooperative and each member makes every effort to selfishly maximize its own payoff. The decision maker allocates permits to firms according to their non-cooperative game equilibrium scores. Proposed models are applied to study a group of paper mills to analyze their payoffs. The results show that the methods proposed in this work can provide reasonable allocation results for all firms. In addition, although our allocation methods adopt the principle of maximizing the payoff of the firm, the efficiency of each firm from current output and input levels is still a factor that determines the permit allocation.

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Acknowledgements

This research was supported by the National Natural Science Funds of China (Nos. 71501139, 71571173, 71620182), Natural Science Funds of Jiangsu Province (No.BK20150307), Research project of philosophy and Social Sciences in Universities of Jiangsu (2015SJB525), China Scholarship Council (No. 201506340126), and Support Funds for Excellent Doctoral Dissertations of USTC (2016-2017).

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Authors and Affiliations

  1. Business School, Soochow University, Soochow, People’s Republic of China

    Jiasen Sun

  2. Soochow Think Tank and Research Center on Smarter Supply Chain, Soochow University, Soochow, People’s Republic of China

    Jiasen Sun

  3. Department of Industrial and Manufacturing Systems Engineering, The University of Hong Kong, Hong Kong, People’s Republic of China

    Yelin Fu

  4. School of Management, University of Science and Technology of China, Hefei, People’s Republic of China

    Xiang Ji

  5. Department of Mechanical Engineering, The University of Auckland, Auckland, New Zealand

    Ray Y. Zhong

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  1. Jiasen Sun
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  2. Yelin Fu
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  3. Xiang Ji
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  4. Ray Y. Zhong
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Correspondence to Yelin Fu or Xiang Ji.

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Sun, J., Fu, Y., Ji, X. et al. Allocation of emission permits using DEA-game-theoretic model. Oper Res Int J 17, 867–884 (2017). https://doi.org/10.1007/s12351-016-0289-y

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  • DOI: https://doi.org/10.1007/s12351-016-0289-y

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