Two-Echelon Supply Chain Decision Model with Price-and-Carbon-Emission Dependent Demand

Abstract

As consumers’ environmental awareness is growing, the impact of carbon emission on the demand is increasingly apparent. Based on price-and-carbon-emission dependent demand, we construct a two-echelon decision model consists of a manufacturer and a retailer. In this model, the manufacturer decides the wholesale price and emissions per unit of output produced, while the retailer decides the retail price and order quantity. We solve the model under the centralized and decentralized scenarios respectively, and based on centralized decision-making mode we propose a coordination contract that can achieve the Pareto improvement of two margin’s profit. Through numerical examples we find that as the impact of carbon emission on demand increases, the strategies of both the manufacturer and retailer change obviously, we also validate the effectiveness of the contract.