The sustainable supply chain network competition with environmental tax policies

Abstract

This paper captures different environmental tax policies in a multi-tiered supply chain network competition context. We derive the governing equilibrium conditions for the noncooperative game theory models for each firm and provide the equivalent variational inequality formulations. The numerical examples investigate the impacts of emission tax policies and product differentiation on the competing firms, and compare the effects of different environmental policies (flat emission tax rates, progressive emission taxes, and the government command-and-control regulations with emission standards) on equilibrium product demands, prices, total emissions, and overall profits. The computational results indicate that the implementation of environmental tax policies along with an increase in consumers’ environmental concerns can not only motivate the firms to perform sustainable operations, but also reduce the total carbon footprint. Furthermore, the low-cost progressive emission tax policies can be as effective as the high flat emission tax rate in terms of reduction in carbon footprint. Therefore, the model developed in this paper can be used by the policymakers and the firms to evaluate the effects of different environmental tax policies in a supply chain competition context.