Coordination of Prefabricated Construction Supply Chain under Cap-and-Trade Policy Considering Consumer Environmental Awareness

Abstract

The construction industry accounts for over one third of excessive CO2 volume, so it is essential that this amount be curbed. Prefabricated construction has superior strengths in terms of both the environment and economy, but low carbon is not one such strength. Meanwhile, the increasing number of consumers with environmental awareness makes it necessary to investigate consumer preferences and behaviors. Therefore, we firstly built a prefabricated construction supply chain consisting of a prefabricated company (leader) and a manufacturer, using the Stackelberg model. To regulate and mitigate carbon emissions, this study investigated the implementation of a cap-and-trade policy. Consumer environmental consciousness was considered from preferences on improving the prefabricated rate and carbon reduction. This study provides decision-making suggestions, not only from a pricing point of view but also for green production, i.e., the prefabricated rate and carbon reduction. We find that consumer environmental consciousness and the cap-and-trade policy improve decision making. To effectively limit the manufacturer’s emissions, we suggest governments set a cap below a certain threshold. However, under the policy, the prefabricated company has free-rider behaviors and gains greater profits as the leader, which results in an unfair profit distribution. Hence, for the sake of optimizing the supply chain’s profits, the cost-sharing contract and the two-part tariff were discussed. Both contracts achieved Pareto improvement, while the two-part tariff contract realizes coordination and reaches the desired level under a centralized system. Numerical analysis also verified the theoretical feasibility.