Abstract
In the cap and trade system, the paper analyses the Stackelberg game between the power asymmetrical retailer and manufacturer and designs a side-payment self-enforcing contract to resolve some arguments that the existing research overemphasizes spontaneity of participation in side-payment contracts design based on supply chain coordination and does not consider rationality and fairness of allocation of profit increment. Also, the numerical analysis was given. The research shows some important conclusions: in the supply chain, the dominant manufacturer is not able to encourage the retailer to improve its promotion level by increasing its carbon cutting level, but the optimal emission reduction level increases with the dominant retailer’s promotion level; the optimal promotion level, emission reduction, and product demand in a retailer leading supply chain are higher than those in a supply chain dominated by manufacturer; with the new side-payment self-enforcing contract, decentralized decision according to individual rationality incurs a collective reason effect in the centralized setting.
Highlights
With consumer’s low-carbon awareness improving, product’s carbon emission affects the utility of consumer directly and is becoming one of the most important factors affecting the market demand
In the cap and trade system, the paper analyses the Stackelberg game between the power asymmetrical retailer and manufacturer and designs a side-payment self-enforcing contract to resolve some arguments that the existing research overemphasizes spontaneity of participation in side-payment contracts design based on supply chain coordination and does not consider rationality and fairness of allocation of profit increment
In the supply chain with a dominant retailer, (1) the optimal emission reduction level increases with the retailer’s promotion level, ρm, ρr, and pc, and decreases with um and ur; (2) the retailer’s optimal promotion level increases with ρr and pc and decreases with um and ur, but it has nothing to do with ρm; (3) the optimal promotion and emission reduction level in the supply chain dominated by retailer are higher than those in the supply chain dominated by manufacturer
Summary
With consumer’s low-carbon awareness improving, product’s carbon emission affects the utility of consumer directly and is becoming one of the most important factors affecting the market demand. Discrete Dynamics in Nature and Society can pass on the operation risk and cost to the manufacturers by some unequal contracts It is good for the retailers but really hurts the system profit of the supply chain and results in a deviation from Pareto optimality [8]. In this paper, considering the impact of carbon emission and promotion on market demand and the regulation of cap and trade on company operation, the game between manufacturer and retailer is analyzed. The paper introduces a new contract to improve the system profit of the supply chain, while the participants make decisions individually.
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