Cooperative decision in a closed‐loop supply chain considering carbon emission reduction and low‐carbon promotion

Abstract

This study examines manufacturers' carbon emission reduction level and retailers' low‐carbon promotion effort in a low‐carbon closed‐loop supply chain (CLSC), in which a manufacturer directly collects the used‐products from consumers. Considering both the carbon emission reduction level and low‐carbon promotion effort depending on the market demands, this study investigates the optimal decisions and performances of CLSC under four different game structures, that is, one non‐cooperative structure and three cooperative structures. In the non‐cooperative structure, the manufacturer controls the carbon emission level, the collection level as well as the wholesale price, while the retailer controls the low‐carbon promotion effort and retail price. The cooperative structures consist of one‐way and two‐way cooperation. In one‐way cooperative structure, the manufacturer shares only a part of retailer's low‐carbon promotion cost. In two‐way cooperative structure, the retailer shares partial manufacturer's carbon emission reduction cost or collection cost based on the one‐way cooperative structure. It shows that the two‐way cooperative structure of the co‐op promotion and carbon emission reduction is the optimal in pricing decisions and carbon emission reduction level, as well as two‐way cooperative structure of the co‐op promotion and collection is the optimal in the collection effort. Under lower the consumer's low‐carbon preferences, the retailer agrees to share the manufacturer's collection cost. When the consumer's low‐carbon preferences are higher, the retailer agrees to share the manufacturer's carbon emission reduction cost. © 2018 American Institute of Chemical Engineers Environ Prog, 38: 143–153, 2019