Stochastic differential game of joint emission reduction in the supply chain based on CSR and carbon cap-and-trade mechanism

Abstract

This paper considers both carbon emission reduction and corporate social responsibility (CSR) goodwill as endogenous variables in the joint emission reduction process of the supply chain system. The joint emission reduction strategy of the three-tier supply chain system is examined from a long-term perspective utilizing stochastic differential game models. Three models, namely the cooperative game, the Nash non-cooperative game, and the Stackelberg master–slave game, are developed to analyse and compare the equilibrium strategies under each model. The results indicate that the manufacturer-led Stackelberg master–slave game can achieve the Pareto improvement in the profits of the supplier, manufacturer, retailer, and the entire supply chain system.