Pricing and carbon emission decisions in the assembly supply chain

Abstract

In the low-carbon environment, firms must make pricing and carbon emission decisions. This study proposes an assembly supply chain model which contains two manufacturers and one assembler to research their pricing and carbon emission decisions. Because of manufacturing core components for final products, manufacturers dominate the assembler in Stackelberg games. Supply chain members' optimal decisions and optimal carbon emission reduction structure are derived based on different cooperative behaviors. Then, this study analyzes how manufacturers' carbon emission reduction cost coefficients affect decision results and finds that the assembly system will produce products with lower carbon emissions and expand market shares if manufacturers enhance carbon emission reduction abilities, but there exist manipulation spaces for supply chain members to raise the market price. Lastly, this study investigates the impacts of cooperative behaviors on decision results and finds that cooperation in the assembly supply chain can consistently achieve a win-win situation as a Pareto improvement. Meanwhile, this study concludes some management insights with practical significance, such as from the manufacturer's perspective, vertical cooperation with the assembler is more effective than horizontal cooperation with another manufacturer, and the assembler should cooperate with the manufacturer with a lower cost coefficient.