Carbon emission reduction and green marketing decisions in a two-echelon low-carbon supply chain considering fairness concern

Abstract

PurposeThe purpose of this paper is to investigate the impact of fairness concern on the optimal pricing, carbon emission reduction (CER), green marketing efforts (GME) and utility of supply chain members in a two-echelon low-carbon supply chain composed of one manufacturer and one retailer. First, three basic models that consider the manufacturer’s different attitudes toward the retailer’s fairness concern are constructed. The optimal decisions of these models are obtained. Second, these optimal solutions are compared, and the effects of some key parameters including fairness concern on the optimal decisions and utility are examined for the three models. Furthermore, the manufacturer may misestimate the retailer’s fairness concern; therefore, an extended model is proposed.Design/methodology/approachThe authors adopt the manufacturer-led Stackelberg game theoretic framework, where the manufacturer decides the wholesale price and CER level and, then, the retailer determines the retail price and GME.FindingsThe results show that fairness concern has a negative impact on the wholesale price, the level of CER and GME, and fairness concern are not always beneficial for maximizing utility, although it is related to whether the manufacturer pays attention to the retailer’s fairness concern. The manufacturer will gain more utility when considering the fairness concern of retailers than non-consideration. Overestimating or underestimating the fairness concern of the retailers does not lead to benefits for the manufacturer.Research limitations/implicationsThis study has the following two limitations that need to be addressed in future research. First, the authors only consider the fairness concern of a single retailer but not peer-induced fairness among multiple competing retailers, which can be taken into account in future studies. Second, the demand function is linearly related to price, CER and GME. Because of the uncertainty of market information, the uncertainty demand function can be further considered.Originality/valueThis paper simultaneously considers the factors CER, GME and fairness concern. The utility function of the retailer is established according to taking the Nash bargaining solution as a fairness reference point, and four different models are constructed and compared.