Abstract
The increased carbon emissions cause relatively climate deterioration and attract more attention of governments, consumers, and enterprises to the low-carbon manufacturing. This paper considers a dynamic supply chain, which is composed of a manufacturer and a retailer, in the presence of the cap-and-trade regulation and the consumers’ reference emission effects. To investigate the manufacturer’s behavior choice and its impacts on the emission reduction and pricing strategies together with the profits of both the channel members, we develop a Stackelberg differential game model in which the manufacturer acts in both myopic and farsighted manners. By comparing the equilibrium strategies, it can be found that the farsighted manufacturer always prefers to keep a lower level of emission reduction. When the emission permit price is relatively high, the wholesale/retail price is lower if the manufacturer is myopic and hence benefits consumers. In addition, there exists a dilemma that the manufacturer is willing to act in a farsighted manner but the retailer looks forward to a partnership with the myopic manufacturer. For a relatively high price of emission permit, adopting myopic strategies results in a better performance of the whole supply chain.
Highlights
With the increase of the carbon emissions and the relative deterioration of the climate, consumers are very concerned about the environmental protection
This paper considers a dynamic supply chain, which is composed of a manufacturer and a retailer, in the presence of the cap-and-trade regulation and the consumers’ reference emission effects
To answer the above questions, we establish a differential game in a bilateral monopoly supply chain, in which the manufacturer acts as a leader and determines the emission reduction level and the wholesale price, and the retailer is a follower and makes a decision on the retail price
Summary
With the increase of the carbon emissions and the relative deterioration of the climate, consumers are very concerned about the environmental protection. To answer the above questions, we establish a differential game in a bilateral monopoly supply chain, in which the manufacturer acts as a leader and determines the emission reduction level and the wholesale price, and the retailer is a follower and makes a decision on the retail price. They play a Stackelberg game and the manufacturer has two behavioral choices, to be farsighted or to be myopic.
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