We characterize the trade-offs among firms' compliance strategies in a market-based program where a regulator interested in controlling emissions from a given set of sources auctions off a fixed number of emissions permits. We model a three-stage game in which firms invest in emissions...

(1) Problem Definition: An increased incidence of quality issues, resulting in defective product returns (DPRs), is a concern for firms bringing innovative products to market. While a firm can recover value from DPRs through refurbishing, consumers are known to act strategically in anticipation...