Equilibrium pricing mechanism of low-carbon supply chain considering carbon cap-and-trade policy

Abstract

In the low-carbon supply chain (LSC) network, because of the different carbon emission reduction investment costs and product exhibition costs, members of the same level will show certain competitive behavior. This paper aims to realize the low-carbon development of the supply chain network based on the carbon quota trading system and the risk aversion characteristics of retailers and uses variational inequality theory to construct the network equilibrium model under the constraint of inventory capacity, and designs an improved projection contraction algorithm to solve the model. The results mean that when the retailer is risk averse, the improvement of the risk aversion coefficient (RAC) reduces the manufacturer's carbon emission rate and profit and increases the product sales price and retailer's profit. When the retailer has an inventory capacity constraint, the enhancement of the inventory capacity constraint increases the profit of the manufacturer and the retailer but reduces the emission reduction rate of the manufacturer. If the retailer has risk aversion characteristics and inventory capacity constraints, the manufacturers' profits will increase as RAC increases, while retailers' profits will decrease as RAC increases. In addition, the carbon trading mechanism can promote enterprises to invest in carbon emission reduction and raise the low-carbon level of products.