Impacts of fairness concerns on financing equilibrium in a low-carbon supply chain

Abstract

With the implementation of low-carbon policy, many companies begin to consider environmental issues when making decisions. This paper investigates a one-manufacturer-one-retailer supply chain under the low-carbon environment, where the retailer is capital-constrained and the manufacturer provides two credit strategies: manufacturer finance and manufacturer investment. The findings show that without fairness concerns, manufacturer investment is the financing equilibrium, and if the cost coefficient of emission reduction is small, manufacturer investment produces lower total carbon emissions and thus the environmental and profitability goals can align. However, different from the literature, when considering the fairness concerns of the retailer, manufacturer finance becomes the financing equilibrium and the high fairness concerns level would reduce the equilibrium region, which is unfavorable for firms to achieve a win–win situation. Finally, we find that fairness concerns would not always benefit the retailer profitably, but could generate higher environmental performance. Our work has the important management implications for firms by exploring impacts of fairness concerns on financing and environment.