Chain-to-chain competition under the cap-and-trade scheme

Abstract

This paper considers two competing supply chains under the cap and trade scheme, each of which consists of one manufacturer and one retailer. In the vertical direction, the manufacturer is the leader of Stackelberg game; in the horizontal direction, there is a parallel competition about the product greening level between manufacturers. We solve and analyze the equilibrium solutions of a centralized supply chain (CSC) and a decentralized supply chain (DSC) respectively. The results show that the greening level of CSC is higher than that of DSC, and the corresponding price is lower than that of DSC. That means the CSC has greater competitive advantage. Numerical analysis reveals that higher emissions reduction investment coefficient leads to lower greening level and higher retail price; higher greening level competition degree leads to lower greening level, whereas affects retail price differently in CSC and DSC.