Cost-sharing Contract Research Articles

RETRACTED: Green investment mechanism considering supply chain risk aversion and negotiating power

• Offer to implement optimal decision in relation to green investment. • Two types of cost-sharing contract is considered. • Supply chain risk aversion is negatively related to green investment. In this paper, we study the green investment decision question in a rice supply chain composed of supply chain risk aversion (SCRA) planting firms and supply chain risk-neutral (SCRN) sellers. Under centralized and decentralized decision-making, we consider the two types of cost-sharing contract (CSC) namely the general (CSC) and the CSC considering the bargaining power. We study the influence of SCRA and construct the green investment optimization model for the rice supply chain. Our study shows that the green investment level in the decentralized rice supply chain is negatively correlated with the SCRA, while the SCRA is positively correlated with the green investment level regardless of the type of CSC. By comparing the two CSCs, we find that both contracts not only improve the expected utility of the rice supply chain but also enhance the green investment level of the rice supply chain. Under the bargaining game, the SCRA is positively correlated with the green investment level and cost-sharing ratio. On the other hand, the bargaining power is also positively correlated with the green investment level and cost-sharing ratio. Under certain conditions, the green investment level of the rice supply chain can be lower than that of the decentralized supply chain. Considering rice planting firms' SCRA and negotiation power, the bargaining CSC is the best under certain conditions.

Coordination and Decision of Supply Chain Under

In order to investigate supply chain coordination and decision under customer balking and stochastic demand, the article considers a two-echelon supply chain consisting of one manufacturer with risk-neutral and one retailer with risk-neutral and develops two models in a centralized and a decentralized system and the three contracts are designed to coordinate supply chain and the optimal price and customer balking strategies are obtained. The results show that the revenue and cost-sharing contract can coordinate supply chain under customer balking and price-dependent demand and achieve the Pareto-improvement; the expected sales quantity and expected reduced sales quantity are influenced conversely by the threshold of inventory and probability of a sale under customer balking. In addition, numerical analysis is given to verify the effectiveness of revenue and cost-sharing contract and the paper gives some managerial insights and puts forward to the future work at last.

Personal protective equipment market coordination using subsidy.

During a pandemic, various resources, including personal protective equipment (PPE), are required to protect people and healthcare workers from getting infected. Due to the high demand and limited supply chain, countries experience a shortage in PPE products. This global crisis imposes a decline in the international trade of PPE supplies. In fact, most governments implement a localization strategy motivating domestic manufacturers to pivot their operations to respond to PPE demands. An oligopolistic market cannot reach the socially optimal coverage without government subsidies. On the other hand, the government subsidy pays the proportion of production costs to reach the socially optimal coverage, while the government’s budget is limited. Therefore, the government collaborates with manufacturers via procurement contracts to increase the supply of PPE products. We propose the first supply chain model of PPE products that investigates manufacturer costs and government expenditure. We consider how different behavioral aspects of manufacturers and government can self-organize towards a system optimum. Additionally, we integrate the consumer surplus, producer surplus, and societal surplus into the game model to maximize social benefit. A cost-sharing contract under the system optimum between government and manufacturers is designed to increase the production of PPEs and hence, helps in reducing the number of infected individuals. We conducted our computational study on real data generated from the mask usage during the Covid-19 pandemic in Los Angeles (LA) County to respond to the reported PPE shortage. Under the socially optimal strategy, the PPE coverage increases by up to 33%, and the number of infected individuals reduces by up to 30% compared to other strategies.

Carbon emission reduction cooperation of three-echelon supply chain under consumer environmental awareness and cap-and-trade regulation.

Considering that both the manufacturer's production process and the transporter's freight process produce carbon emissions, this paper constructed a three-echelon supply chain composed of a manufacturer, a transporter, and a retailer. This article studies the cooperative carbon emission reduction among the supply chain members under the carbon cap-and-trade policy and consumer environmental awareness. We used the Stackelberg game to explore four scenarios as follows: (1) in the non-cooperative decision model, no cooperation takes place among all supply chain members; (2) in the local cooperation decision of the manufacturer and the transporter alliance model, the manufacturer and the transporter work together to make decisions reducing carbon emissions, but each member of the supply chain makes its own pricing decisions; (3) in the local cooperation decision of the retailer-transporter alliance model, there is no cooperation except that the retailer and the transporter cooperate with each other to determine the selling price of the product; and (4) in the overall-cooperative decision model, there is complete cooperation among the members of the supply chain, who collectively decide on carbon emission reduction and the selling price of the product. Then, using the backward induction method, we derived and compared the equilibrium solutions and the profits of the supply chain system. The results showed that the scenario of complete cooperation among all supply chain members had the best performance in carbon emission reduction, market equilibrium quantity, and the supply chain system's profit, but the selling price of the product was likely to be higher than other scenarios. Two contracts have been proposed to coordinate the supply chain system. The cost-sharing contract is effective but imperfect under limited constraints. The two-part tariff contract can realize perfect coordination of the supply chain. Finally, we obtained several interesting conclusions from the numerical example and provide managerial insights and policy implications from the analytical results.

Strategy Optimization of Quality Improvement and Price Subsidy of Agri-Foods Supply Chain.

Based on the realistic concerns about the improvement of the quality of agricultural foods (agri-foods), the optimal supply quality and price subsidy strategies of producers and sellers for the two-level agricultural supply chain, composed of a producer and a seller, are studied. The differences in the quality safety, price, and market demand of agri-foods in the supply chain are compared and analyzed. The study found that the maximum profit of supply chain participants decreases with the increase of price elasticity of demand. When the quality of agri-foods is upgraded in a producer-led manner, the quality of agri-foods in the supply chain does not undergo substantial improvement, and the maximum profit of agri-foods operators is insensitive to the price elasticity of demand at this time. When the seller-led quality upgrading is launched, the maximum profit of the producer decreases with the increase of the quality elasticity of demand, the maximum profit of the seller increases with the increase of the quality elasticity of demand, and the total profit of the supply chain also increases with the increase of the quality elasticity of demand under the centralized decision situation. The quality and safety of agri-foods as well as the overall profit of the supply chain can be improved most effectively under the centralized control decision with the goal of maximizing the supply chain benefits. In terms of quality and price, quality improvement actions of agri-foods driven by supply-side producers are less effective than those driven by demand-side consumption. In addition, cost-sharing contracts can significantly improve the quality of agri-foods in the supply chain and make them more “high-quality and low-price” than before the adoption of cost-sharing contracts.

Dynamic Differential Game Strategy of the Energy Big Data Ecosystem Considering Technological Innovation

This study discusses how to create strategic value through energy big data and how to promote stakeholder interaction mechanisms in the evolution of the energy big data ecosystem. We use differential game methods to study the interaction between one power grid enterprise (PG) and one technology supplier (TS) under three different cost-sharing contracts: without cost-sharing contract, cost-sharing contract, and two-way subsidy contract. The effectiveness of the dynamic equilibrium strategies under different contracts is verified via numerical simulations. The results show that under the centralized decision scenario, the technological innovation investment, the degree of technological advancement of PG and TS, and the total profit of the supply chain system are superior to the decentralized decision scenario. The extent of TS technology innovation investment depends on the share rate of PG. Technology innovation investment and the profits of energy big data service supply chain stakeholders will increase with the sensitivity coefficient of technological advancement. Compared with contracts without cost-sharing and with cost-sharing, the two-way subsidy contract can provide the Pareto optimal solution for the investment trajectory of technological innovation and long-term profits. Theoretically, this study reveals a new perspective in the research on the relationship between power grid enterprises and technology suppliers under dynamic technology innovation. In practice, this study facilitates power grid enterprises and technology suppliers to form a closer cooperative relationship in the energy big data ecosystem. More importantly, it is helpful for power grid enterprises to make optimal transaction decisions at different stages of energy big data ecosystem evolution.

Contract Design of Logistics Service Supply Chain Based on Smart Transformation

A logistics service integrator (LSI) usually requires a logistics service provider (LSP) to carry out smart transformation in order to improve the level of logistics service. However, LSP’s smart transformation faces uncertainty in terms of investments and income, which seriously hinders LSP’s enthusiasm for logistics service innovation. In this paper, we construct a logistics service supply chain (LSSC) consisting of an LSI and an LSP to explore the incentive mechanism for LSPs to undergo smart transformation. As a benchmark for comparison, we first obtain the equilibrium results under centralized decision making and wholesale price (WP) contracts. Then, cost-sharing (CS), revenue-sharing (RS), and cost sharing–revenue sharing (CS-RS) hybrid contracts are proposed. It is found that when the CS coefficient is in a certain interval, the CS contract can increase the profit of LSI and the smart level of logistics service, but it will decrease the profit of LSP. With the exception that the wholesale price of logistics services will decrease, the equilibrium results under the RS contract and WP contract remain consistent. Only the CS-RS hybrid contract can achieve the perfect coordination of LSSC. In addition, by conducting numerical analysis, we find that the enhancement of the smart effect can encourage LSP to improve the smart level and increase the overall revenue of LSSC. To the best of our knowledge, this paper is the first study to explore the incentive mechanism between LSI and LSP in the context of logistics service smart transformation. Our findings guide the LSI in implementing an effective contract.

Coordination of Prefabricated Construction Supply Chain under Cap-and-Trade Policy Considering Consumer Environmental Awareness

The construction industry accounts for over one third of excessive CO2 volume, so it is essential that this amount be curbed. Prefabricated construction has superior strengths in terms of both the environment and economy, but low carbon is not one such strength. Meanwhile, the increasing number of consumers with environmental awareness makes it necessary to investigate consumer preferences and behaviors. Therefore, we firstly built a prefabricated construction supply chain consisting of a prefabricated company (leader) and a manufacturer, using the Stackelberg model. To regulate and mitigate carbon emissions, this study investigated the implementation of a cap-and-trade policy. Consumer environmental consciousness was considered from preferences on improving the prefabricated rate and carbon reduction. This study provides decision-making suggestions, not only from a pricing point of view but also for green production, i.e., the prefabricated rate and carbon reduction. We find that consumer environmental consciousness and the cap-and-trade policy improve decision making. To effectively limit the manufacturer’s emissions, we suggest governments set a cap below a certain threshold. However, under the policy, the prefabricated company has free-rider behaviors and gains greater profits as the leader, which results in an unfair profit distribution. Hence, for the sake of optimizing the supply chain’s profits, the cost-sharing contract and the two-part tariff were discussed. Both contracts achieved Pareto improvement, while the two-part tariff contract realizes coordination and reaches the desired level under a centralized system. Numerical analysis also verified the theoretical feasibility.

Industry 4.0 (I4.0) Based Virtual Organization Model for the Coordination of Sustainable Textile Supply Chain

The lack of attention on the forward and backward supply chain issues, i.e., the transparency between supply chain agents, information sharing, resource deployment, workforce knowledge, waste reduction, cost efficiency, and resource management are the major problems of textile supply chain. The coordination of forward and backward supply chain becomes difficult due to the players' self-interest and firmographics. It becomes much complicated when we consider the triple bottom line of sustainability (TBLS) in the supply chain. Therefore, in this paper, we propose an Industry 4.0 (I4.0) based virtual organization model for the coordination of the forward and backward supply chain. The results obtained through virtual organization model are also compared with the centralized supply chain and traditional cost-sharing contract. The results reveal that virtual organization model can perform better than the price only contract and it will be help firms in achieving greater sustainability with respect to traditional contract mechanisms.

Carbon emission reduction decisions in construction supply chain based on differential game with government subsidies

In the context of a low-carbon economy, carbon emission reduction (CER) has become an environmental issue of world concern. As a key industry sector for CER, buildings' CER behavior in the low-carbon building supply chain is affected by the policies of various national governments. This paper fills this research gap by studying and analyzing the CER decision of the construction supply chain under government subsidies with the help of differential game theory and MATLAB numerical analysis software. In this paper, the differential game model with the centralized decision-making (CDM), decentralized decision-making (DDM) and the introduction of cost-sharing contract (CSC) for CER in the construction supply chain under the government subsidies model with developers and contractors as stakeholders in the construction industry are constructed with the help of differential game theory, taking the amount of CER in construction as the state variable, and the optimal feedback equilibrium strategies of both parties in the 3 decision-situations are derived and compared, as well as the optimal trajectory of CER in construction over time. The study found that after the introduction of CSC, the total profit of the construction supply chain under DDM reaches the level of CDM. Complemented by government subsidies, the building CER and the market demand for low-carbon buildings reach optimal values for both parties under DDM.

Research on the coordination of the power battery echelon utilization supply chain considering recycling outsourcing

In the year 2020, the cumulative production and sales of new energy vehicles in China have reached 1.366, and 1.367 million units, which have increased by 7.5% and 10.9% over the previous year. To solve the problem of used batteries, the power battery echelon use system has been proposed. This paper constructs a three-party game supply chain model for one battery manufacturer, one car manufacturer, and one third-party recycler to analyze the impact of the external environment on the supply chain and to a new coordination contract. The research results show that: the retail price of the high-capacity used battery always changes in the same direction as the retail price of the low-capacity used battery. The profit of the battery manufacturer and third-party recycler in the decentralized decision-making model is affected by the retail price of the low-capacity used battery, but the car manufacturers are not affected by it. With the increase in the retail price of the low-capacity used battery, the profits of the third-party recycler will be greater than that of the car manufacturer. The use of profit transfer contracts and the cost-sharing contract can coordinate the supply chain and increase the demand for automobiles and the actual recycling volume. Interestingly, for the third-party recycler, the smaller the cost-shared, the more additional benefits it will get. The actual recycling volume is mainly affected by the market environment.

Decisions on Pricing, Sustainability Effort, and Carbon Cap under Wholesale Price and Cost-Sharing Contracts

Rapid economic growth and industrialization have brought material abundance and convenience, but also social and environmental problems such as global warming, climate change, and ozone depletion. For this reason, the public and governments have continued to make efforts to reduce carbon oxide emissions worldwide over the past few decades. To achieve this mission, cap-and-trade regulations have been introduced as one of the most effective market-based mechanisms to control carbon emissions. Accordingly, sustainability efforts, including the development of green products and innovating manufacturing technologies, are being made by companies in supply chains to reduce their carbon emissions. In the context of sustainability innovations and carbon emission constraints, this article investigates pricing decisions, the degree of sustainability efforts, and carbon caps under two different supply chain contracts—in this case, wholesale price contract and cost-sharing contract. This article establishes a Stackelberg game model under each of the supply chain contract types and presents the equilibrium decisions made by players of the game. Major findings of this article reveal that (i) the performance of the supply chain is considerably affected by the presence of a carbon cap; (ii) the higher the carbon cap set by a government is, the more sustainability innovation efforts the supply chain makes; and (iii) the supply chain can improve its profitability and its sustainability under a cost-sharing contract.

Optimising small-scale electronic commerce supply chain operations: a dynamic cost-sharing contract approach

For small-scale electronic commerce supply chains, designing effective strategies to improve operational effectiveness, market share and long-term survival are essential aspects. However, researchers have given less attention in addressing these issues. This study proposes a dynamic cost-sharing contract for an e-tailer supply chain to address the issues of asymmetric information, long-term integration, and ineffective costs. We include consistency constraints to obtain stable incentives over time and eliminate the need for re-negotiation. The findings emphasise that the dynamic contract significantly reduces the overall supply chain costs. The consistency constraints guarantee high incentives, thus assuring the players remain in the total contract period and enable long-term integration.

Decision-Making and the Contract of the Complementary Product Supply Chain Considering Consumers' Environmental Awareness and Government Green Subsidies.

The environmental awareness of consumers and enterprises has gradually increased, and green production and green consumption have become the main theme of social economy. On the other hand, the complementary product market has become an important source of competitive advantage for enterprises. Considering a complementary product supply chain, and taking account of the consumers’ environmental awareness and the green subsidies provided by the government, this paper examines members’ decisions in relation to four contract models based on game theory. By solving the model, it is shown that the government’s green subsidy plan improves the green degree of subsidized products and complementary products. Furthermore, compared to wholesale price contracts, revenue-sharing and cost-sharing contracts motivate manufacturers to improve the greenness of subsidized products, and they achieve a Pareto improvement for the whole supply chain and its members, when the contract parameters are appropriate. Numerical experiments also reveal that both the greenness of the complementary products and the profit for members increase with the green innovation spillover effect as a result of the complementary products and the scale of green consumers with environmental awareness in the market. This study provides good guidance for decision-making concerning the complementary product supply chain, and further contributes to environmental protection.

Research on electricity supply chain strategy coordination considering peak-valley pricing policy and service quality investment

An electricity supply chain game model composed of electricity generation enterprise and electricity retailer enterprise is constructed to evaluate the impact of service quality and peak-valley pricing on electricity supply chain coordination mechanism. Decisions on electricity service quality and peak-valley pricing are studied. Following this, the contract coordination under the electricity supply chain is discussed. Based on the game framework, the main research results are as follows. First, the centralized system provides a lower peak-valley price and higher electricity service quality, electricity demand, and supply chain’s profit compared with the decentralized system. Second, with the service quality sensitivity coefficient, the electricity service quality, electricity price, and electricity demand increase, increasing the profit. Third, with the electricity service quality cost coefficient, the electricity service quality, electricity price, and electricity demand decrease, reducing the profit. Fourth, revenue sharing and an electricity service quality investment cost-sharing contract could achieve the coordination of the supply chain.

Coordination Decisions for a Low-Carbon Supply Chain Considering Risk Aversion under Carbon Quota Policy.

To mitigate climate change, the governments of various countries have formulated and implemented corresponding low-carbon emission reduction policies. Meanwhile, consumers’ awareness of the necessity of environmental protection is gradually improving, and more consumers pay attention to the environmental attributes of products, which all encourages enterprises to have great power to implement low carbon technology. As rational decision makers, members tend to show the characteristics of risk aversion. How to meet the needs of consumers and reduce their own risks has become a key point of low-carbon supply chain management. Considering carbon quota policy, in this paper, the optimal pricing decision-making process of a supply chain system is discussed under risk-neutral and risk-avoidance decision-making scenarios by game theory, and a cost-sharing contract is used to coordinate the decision-making process of a supply chain system. By analyzing the influence of the risk aversion coefficient on the optimal strategies of participants, we find that when the manufacturer has the risk aversion characteristic, the risk aversion coefficient will further reduce the carbon emission rate, the wholesale price of the product and the manufacturer’s profit but increase the product order quantity and the retailer’s profit. In addition, if consumers have a high preference for low-carbon products, the manufacturer’s risk-aversion coefficient will lead to a lower selling price than in the centralized decision-making situation, and the profit of the supply chain system will also be further reduced. When the cost-sharing contract is adopted for coordination, the Pareto improvement of supply chain members’ profits can be achieved when the parameters of the cost-sharing contract are appropriate, regardless of the manufacturer’s risk-neutral decision or risk-aversion decision.

Research on financing strategy of low-carbon supply chain based on cost-sharing contract.

The paper considers a low-carbon supply chain which consists of a capital constrained manufacturer and a retailer. We consider the retailer takes part in low-carbon cost sharing when the manufacturer faces capital constraints due to increasing investment in low-carbon production technologies. We further construct and analyze the performance of the supply chain under three financing strategies: capital constraint without financing (NF), trade credit financing (TCF), and bank credit financing (BCF). Our model provides a financing decision-making model for a low-carbon supply chain with capital constraints, and we design a cost-sharing contract can coordinate supply chain and strengthen the cooperation between enterprises. Moreover, through numerically analyzing the impact of cost-sharing ratio, low carbon preference coefficient of consumers, and interest rate on supply chain decisions and profits, we find (i) the profit of low-carbon supply chain members with capital constrain under TCF strategy is always better than BCF strategy; (ii) cost-sharing contract can increase the profit of the manufacturer and the retailer; and (iii) the low carbon preference coefficient of consumers is also a positive factor in the optimal profit of the manufacturer and retailer.

A Capacity Cost-Sharing Contract for a Two-Stage Supply Chain with a Risk-Averse Supplier under a Bargaining Power

This study considers a two-stage supply chain (SC) consisting of a single supplier and a manufacturer. When the manufacturer introduces a new product to the market, both the manufacturer and supplier should install production capacity in advance. Since capacity building often takes a long time, the demand is uncertain at the time of capacity decision making. The supplier often makes a conservative decision on capacity building to avoid possible capital risks due to excess capacity, which leads to the so-called double marginalization problem. Various risk-sharing supply contracts have recently been studied in academia to overcome the double marginalization problem. However, most existing studies ignore the bargaining power of each SC member and capacity investment. This study aims to fill the research gap by including capacity investment and bargaining power in the supply contract process. A capacity cost-sharing (CCS) contract is introduced in which the manufacturer shares the supplier’s capacity investment risk. We investigate how to set the contract parameters in the CCS contract to coordinate the supply chain. It is found that the wholesale price and manufacturer’s CCS ratio are negatively proportional to each other, and the manufacturer’s expected profit increases as the CCS ratio (wholesale price) increases (decreases) in the coordinated CCS contract. We show that there exists a CCS contract leading to a coordinated supply chain for a specific range of bargaining power. We also present a new CCS contract for a supply chain with a risk-averse supplier. A numerical illustration is provided to clarify how the contract parameters are determined and to examine the effect of the contract parameters on SC performance. Managerial implications and possible future work are discussed.

Low-carbon supply chain operations: impacts of carbon tax and fairness concerns

AbstractUnder a carbon tax, this study established game theory models of a low-carbon supply chain to investigate the effects of fairness and carbon tax rate on the retail price and on carbon emission reduction level, as well as on the profits of the manufacturer, retailer and the whole supply chain. Results show that the carbon emission reduction level and the supply chain profit under a centralized supply chain are both higher than those under a decentralized supply chain, if the manufacturer’s fairness concern, the carbon emission reduction level and the supply chain profit will further decrease, but manufacturers’ profits are taking a growing share of the supply chain’s total profits. Under three different modes, the carbon emission reduction level will increase with the increase of the carbon coefficient. The retail price and the supply chain profit are jointly determined by the carbon tax rate and the carbon coefficient. Moreover, the implementation of a carbon reduction investment cost-sharing contract can increase the demand of low-carbon products and reduce the retail price. Under a carbon tax, regardless of whether manufacturers pay attention to fairness, the carbon reduction investment cost-sharing contract can effectively improve the overall efficiency of the low-carbon supply chain.

Wholesale-price vs cost-sharing contracts in a green supply chain with reference price effect under different power structures

PurposeThis research aims to examine which cooperative contract (wholesale-price contract or cost-sharing contract) can more effectively upgrade the green degree of product and promote demand when considering consumer reference price effect under different power structures.Design/methodology/approachThis research investigates a dyadic green supply chain composed of one manufacturer and one retailer. Four Stackelberg game models with a cost-sharing contract or a wholesale-price contract are built in retailer-led and manufacturer-led scenarios, respectively. Using backward induction, the optimal green decision under each model is obtained. In addition, the optimal cooperative contract is proposed by comparing these four models.FindingsIt is found that under consumer reference price effect, a cost-sharing contract outperforms a wholesale-price contract in upgrading product greenness and promoting demand. Under any single contract, the retailer-led situation is more conducive to improving product greenness than the manufacturer-led situation. Moreover, consumer reference price effect would reduce the sharing ratio of a cost-sharing contract when the manufacturer dominates, but it could mitigate the problem of double marginalization by reducing wholesale and retail prices under both types of contracts, which would enhance consumer surplus.Originality/valueIt is a new attempt to incorporate consumer reference price effect and power structure into a green supply chain framework and proposes a novel demand function that simultaneously emphasizes consumer reference price effect, consumer environmental awareness and product green attribute. In addition, it provides managerial insights for business managers to choose green cooperative contracts with consumer reference price effect under different power structures.