Non-collaborative emission targets joining and quantity flow decisions in a Stackelberg setting

This study considers a Stackelberg channel, where the leader determines the quantity flow along the channel. Both the leader and the follower have emission targets and the leader should respect those targets. In this setting, the leader and the follower can join their emission targets to lower costs while ensuring that the channel emissions do not exceed the cumulative target. The decisions for joining targets define a non-collaborative game between the leader and the follower. We characterize the equilibrium of this game. Furthermore, we analyze the effects of channel leadership. A manufacturer-retailer scenario is used to demonstrate the model.