Abstract

This paper considers solving environmental problems through levying a consumption pollution tax. Under a given government tax rate, the manufacturer decides not only the optimal price, but also the optimal pollution content for a unit of product. This paper performs a conversion of consumer demand using a general probability density function. In addition to obtaining mathematical functions for optimal product pricing and optimal product pollution for manufacturers, this paper also provides an extended discussion concerning the nature of optimal solutions.

Key words: Consumer evaluation function, consumption pollution tax, optimization, optimal pricing, optimal pollution.