Abstract
Environmental issues have increasingly received attention in both industry and academia. Many firms have started to make sustainable investments, such as adopting the pollution-abatement technologies, to reduce carbon emissions. To investigate the impacts of the sustainable investment on firms’ profit and emission reduction, we consider supply chains with uncertain demand in different power structures. Specifically, we examine the sustainable investment problem in three supply chain power structures, i.e., manufacturer Stackelberg (MS) power structure, vertical Nash (VN) power structure and retailer Stackelberg (RS) power structure. We first derive the optimal decisions for both the retailer and manufacturer in each power structure. Then, by comparing the results in the three power structures, we find that the manufacturer gets benefits from making the sustainable investment, especially in unequal power structures. When the average market size is large (small) enough, both of the supply chain members obtain more profits in the MS (RS) power structure. From an environmental perspective, we find that the emission reduction is more significant in sequential games (i.e., MS and RS power structures) than that in a simultaneous game (i.e., VN power structure). In addition, we conduct some numerical studies and discuss more managerial insights in the paper.
Highlights
Facing environmental issues, many firms have adopted some pollution-abatement technologies to reduce carbon emissions and essentially keep biological systems remaining diverse and productive, indefinitely
Our study is similar to these two studies by considering similar settings for the demands; we focus on examining the joint effect of the sustainable investment and power structure with stochastic demands, which significantly affect the environmental performance
This paper studies a two-echelon sustainable supply chain consisting of a single retailer and a single manufacturer, in three different power structures
Summary
Many firms have adopted some pollution-abatement technologies to reduce carbon emissions and essentially keep biological systems remaining diverse and productive, indefinitely. Focused on the market side, the sustainable investment has positive effects on the demands of the eco-friendly products, as shown in both research papers and industry reports [4,5,6]. It implies that some customers are environmental aware. We are interested in how the factors such as average market size, consumer environmental awareness, sustainable investment cost and tax credits affect the supply chains’ economic and environmental performances in different power structures?. The joint effect of power structures and sustainable investment in the economic and environmental performance, such as emission reduction of the supply chain, has been investigated. All of the technical proofs are relegated to the Appendix A
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