Long-term emission reduction strategy in a three-echelon supply chain considering government intervention and Consumers’ low-carbon preferences

Abstract

This paper investigates a three-echelon supply chain that consists of a supplier, a manufacturer, and a retailer. Owing to the government intervention and consumers’ low-carbon preferences, the market share is influenced by the carbon emission reduction technology improvement of the supplier and manufacturer and the low carbon advertisement of the retailer. We then construct the differential game model of three-echelon supply chain from the perspectives of decentralized, governmental intervention, supplier cost sharing and governmental intervention, and retailer cost sharing and governmental intervention. Main results are as follows: (1) the manufacturer and supplier's active investment in emission reduction technologies and retailer's advertisement will consistently increase the profits of supply chain members; (2) given that the government subsidizes the manufacturer's carbon emission reduction technology through tax exemption or tax reduction, the manufacturer will always fall into a prisoner's dilemma once the government's carbon emission limit exceeds a certain threshold range; (3) consumer preferences will have a positive effect on manufacturer and supplier's emission reduction strategies, whereas it has nothing to do with retailer's advertisement, and retailer's investment in advertising only depends on manufacturer's subsidy policy; (4) compared with decentralized scenario, Pareto improvement can always be realized whether the manufacturer chooses to cooperate with the supplier or retailer. Our results can provide theoretical basis for the carbon emission strategy of three-echelon supply chain members in low-carbon environment.