Two-part Tariff Contract Research Articles

Research on the Game Model of Green Technology Investment in a Two-Echelon Manufacturing Supply Chain Under Carbon Tax Regulation

Using a Stackelberg game model, this research examines the impact of government-imposed carbon taxes on the sustainability of a two-echelon supply chain. The analysis focuses on the interactions between upstream suppliers and downstream manufacturers, taking into account how manufacturers’ carbon emissions influence market demand, as well as how sustainability levels and price affect this demand. The results show that a centralized system has a lesser potential for total profit development in the supply chain than a decentralized system. To encourage investment in green technologies throughout the supply chain, this paper proposes two coordination mechanisms: a green subsidy and a two-part tariff contract. Numerical study reveals that a win–win scenario for the supply chain requires suppliers to share part of the costs. Furthermore, under a two-part tariff contract, successfully managing fixed costs can result in total profit levels comparable to those in a centralized system. The research also makes strategy recommendations, such as differentiating carbon levies, improving supply chain coordination, and assessing fixed costs. These aim to provide theoretical and practical implications for supply chain management in order to assist businesses and policymakers in effectively responding to the problems of climate change.

Optimal decisions and coordination of a supply chain in the hybrid recycling mode with traceability and fairness concern

Considering the case of recycling competition between a manufacturer and a retailer, we construct game models under centralised and decentralised decision-making with or without fairness concern, respectively. By comparatively analysing the optimal decisions and profits under the three models, we design an improved two-part tariff contract to realise supply chain coordination. We have the following findings: First, in the supply chain with traceability, consumers’ preference for traceability and the impact of traceability on recycling are not only beneficial to the environment but also to each enterprise. Second, the retailer’s concern for fairness can harm the profits of the manufacturer and system. Moreover, the retailer’s disproportionate focus on fairness of the distribution of revenues hinders the introduction and development of the traceability system, leading to lower recycling volume and demand. Third, the traceability system is most efficient under centralised decision-making, attaining the highest traceability level, recycling volume, and system profit. The retail price and manufacturer’s recycling price are lower than those under decentralised decision-making. Our findings also suggest that improved two-part tariff contract can enhance the chain members’ performance. While fairness concern and fierce recycling competition hinder implementation of the coordination mechanism, and improved traceability facilitates the attainment of coordination.

Cooperation of firms’ environmental innovation in a supply chain under government regulation

As climate pollution becomes more severe, there is a growing interest in reducing emissions across all industries. Motivated by the emerging popularity of inter-firm cooperation to reduce carbon emissions in the supply chain, this paper investigates the effect of the firms’ environmental innovation cooperation under government regulation. Specifically, we consider a supply chain with a manufacturer selling products through a retailer, where both firms have asymmetrical environmental innovation efficiencies. Based on whether to cooperate in environmental innovation, the manufacturer and retailer invest in environmental innovation separately or simultaneously. The findings suggest that corporate collaboration, especially environmental innovation cartels, can promote environmental innovation, reducing product emission intensity, further driving down wholesale price, and increasing sales volume. Notably, the more closely firms cooperate, the more beneficial it is for the entire supply chain and consumers, but not necessarily for the manufacturer and retailer simultaneously. In the case of environmental innovation cartels, a two-part tariff contract can coordinate the supply chain, increasing the manufacturer’s and retailer’s profits. Furthermore, cooperation is detrimental to the environment when the carbon tax rate is relatively high. The government should set the intensity of regulation reasonably, considering the environmental innovation mode of firms. As the emission quota grows, carbon tax regulation is more likely to result in fewer emissions and is favored by policymakers. We also extend the model to multiple situations to check the robustness of the results and find our main results remain valid.

Developing sustainable and efficient customer-centric strategies for a three-stage dual-channel green supply chain: a game-theoretic approach with two-part tariff contract

Developing sustainable and efficient customer-centric strategies for a three-stage dual-channel green supply chain: a game-theoretic approach with two-part tariff contract

Licensing of a product innovation by an outside innovator to a Stackelberg duopoly

ABSTRACT We examine the optimal strategy of an outside innovator owning a quality-improved product when licensing it to a Stackelberg duopoly. We show that only a single licence is granted, regardless of whether there is quantity or price competition in the marketplace. However, both the licensee and contractual terms in each context differ. Under quantity competition, the licence is granted to the market-leading firm by means of a non-distorting contract, whereas under price competition the licence is granted to the market-following firm by means of a distorting two-part tariff contract with per-unit royalty. From a welfare perspective, exclusive licensing is beneficial in both contexts compared to the pre-licensing scenario, although under price competition, consumers can be harmed if the innovation is small. Finally, licensing leads price competition to yield a less efficient outcome than quantity competition due to greater market collusion. Licensing by means of three-part tariff contracts is also discussed, as well as licensing when potential licensees operate as a mixed duopoly.

The impacts of retailer's carbon tax on the price and carbon reduction decisions in supply chain

Under the path of environmental-friendly development, retailers gradually play a significant role on curbing carbon emissions in supply chains, and carbon tax for retailers (RCT) could be promising. At the same time, consumers are increasingly inclined to have environmental awareness (CEA). In this paper, we investigate the impacts of RCT on a two-echelon supply chain, along with the coordination of the firms when RCT are present. For the cases with and without RCT, in a carbon-sensitive market, we examine and compare the optimal pricing and carbon reduction decisions, the firms’ profits, consumer surplus and the social welfare. The key findings are listed below. First, the presence of RCT always increases the retailer’s carbon reduction effort, but does not necessarily increase that of the manufacturer, depending on the retailer's carbon reduction investment cost factor (CRICF). Second, RCT will magnify the impacts of the retailer's CRICF on consumer demand, the manufacturer's profit and consumer surplus. Third, analytical and numerical results suggest that the retailer's CRICF is a critical factor for the impacts of RCT on the supply chain, as the firms and the society will benefit from RCT only when the retailer's CRICF is relatively low. Lastly, a two-part tariff contract can coordinate the supply chain, where the carbon reduction efforts of the two firms are equal to those in centralized decision making scenario.

Dual channel sales in supply chain: live streaming or traditional e-commerce

In recent years, live streaming is becoming a popular channel to sell products all over the world. Compared to traditional e-commerce channel, live streaming channel may not only bring consumers more shopping convenience, but also pose consumers more privacy concern. This paper considers a supply chain consisting of a manufacturer and an e-tailer who sells through dual channels (i.e., live streaming and traditional e-commerce) to explore how shopping convenience and privacy concern affect the optimal decisions. We build game models of two pricing (exogenous and endogenous) and two incentive contracts (wholesale price and two-part tariff). We find that the optimal promotion efforts are decreasing in shopping convenience while increasing in privacy concerns under the wholesale price contract, and independent of them under the two-part tariff contract when pricing is not a decision (such as iPhone); the optimal promotion efforts are increasing in shopping convenience while decreasing in privacy concern when pricing is a decision (such as the seasonal products). Whether the retail pricing is a decision or not, supply chain coordination can be achieved by the two-part tariff contract, but not through the wholesale price contract. Further, the two-part tariff contract is more favorable to the manufacturer if the exogenously given retail price is low, and the wholesale price contract is more favorable to the manufacturer if the retail price is high; the two-part tariff contract is always more beneficial for the supply chain than the wholesale price contract. Finally, we extend our analysis to relax a more realistic form with a variable effort elasticity and verify the robustness of the theoretical results.

Green initiative in a two-echelon Supply chain with co-ordination and contract

In recent times, environmental responsibility is an important factor that determines the success of a Supply Chain. In this study, we have considered green production in the light of various co-ordinations and contracts. This is a two-echelon Supply chain consisting of one manufacturer who designs and develops a green product and the retailer sells it to the environmentally aware customers and the awareness is converted to actual purchasing behaviour by the retailers marketing strategy and the manufacturer’s product design and development which includes technology usage to develop the greenness,packaging and several other factors which were not studied earlier. All these factors are involved in our demand function which is distinct from the existing literature. The model is developed under three contracts, Price-only, green marketing cost sharing and two-part tariff contracts. This is an well-established fact that co-ordination enhances the economic benefits to every tier member of a chain. Our findings also establish that co-ordination and co-operation among members will enhance their environmental sustainability. In this way they can carry out their social responsibilities towards our environment. It is also noticed that as the environmental consciousness of the consumers increases, the cost sharing contract is more profitable for manufacturer than that for retailer whereas the price only contract is profitable for the retailer.

Managing Industry 4.0 supply chains with innovative and traditional products: Contract cessation points and value of information

In supply chain management, how contract designs relate to the production system with traditional and Industry 4.0 innovative products (I4I products) is under-explored. In this paper, we fill this literature gap by studying a two-period model in which a manufacturer strategically chooses to incorporate an I4I product line into a traditional product line. In this context, we show that there exists a critical market potential threshold above which the sale of the I4I product is higher than that of the traditional product even when the former is sold at a higher price. For both wholesale price and linear two-part tariff contracts, we show that the contract cessation points and critical market potential threshold behave oppositely. We also find that the innovation level for the I4I product would be higher when the manufacturer’s expected valuation towards the retailer’s cost is higher than the actual one. We extend our base model to demonstrate that the innovation level of the I4I product is higher when the manufacturer uses a linear two-part tariff contract instead of a wholesale price contract. Finally, we uncover that the quantity-dependent innovation investment results in increased profitability and innovation level for the manufacturer provided that the innovation investment coefficient is sufficiently high.

Firms’ shareholding behavior in green supply chains: Carbon emissions reduction, power structures, and technology spillovers

Leaders in green supply chains are increasingly focusing on improving strategic synergy with followers through shareholding strategies. By constructing Stackelberg models, we explore the operational mechanisms in two models, manufacturer-led and retailer-led, which have forward and backward shareholding strategies, respectively. Compared with non-shareholding models, we find that the retailer's pricing becomes more sensitive to changes in the market environment after applying shareholding strategies, while the manufacturer's pricing depends on its power status. Interestingly, leaders and entire supply chains prefer shareholding strategies, while followers prefer shareholding strategies in good market environment or in bad market environment with their shares held by leaders below certain thresholds. Moreover, both forward and backward shareholding strategies can effectively promote carbon emissions reduction. Improving manufacturers' technology spillover positively impacts pricing and carbon emissions reduction and profits, and a reasonable shareholding ratio can encourage manufacturers to increase the level of technology spillover. Finally, a two-part tariff contract can effectively coordinate the vertical shareholding supply chain. The results provide decision guidance for managers in applying shareholding strategies to build a strategic alliance to improve firms' economic and environmental performance.

Blockchain adoption and contract coordination of poverty alleviation supply chain considering altruistic preference

This study discusses blockchain adoption strategy and coordination of a poverty alleviation supply chain (PASC) consisting of one retailer with altruistic preference and one farmer cooperative. Four decentralized models are considered, including scenario AN (with altruistic preference and without blockchain), scenario AB (with altruistic preference and with blockchain), scenario DN (without altruistic preference and without blockchain), and scenario DB (without altruistic preference and with blockchain). We solve the game models in these four scenarios based on backward induction and obtain the optimal solutions. Additionally, two centralized models, namely scenario CN (without blockchain) and scenario CB (with blockchain), are used as benchmarks for coordinating the PASC. Through comparative analysis, we find that (1) the retailer does not necessarily benefit from blockchain adoption. The retailer has an incentive to adopt blockchain when the fixed and unit operating costs of blockchain adoption are low. Interestingly, even when the unit operating cost of blockchain adoption is high, the retailer can still increase its profits by adopting blockchain when consumers’ acceptance level of agricultural products is low. (2) Under certain conditions, blockchain adoption can lead to a win–win situation for the retailer and the farmer cooperative. (3) The retailer’s altruistic preference increases the profits of the farmer cooperative and the PASC, but at the cost of reducing its own profits. (4) The two proposed contracts, the altruistic preference joint two-part tariff contract and the altruistic preference joint profit-sharing contract, can effectively coordinate the PASC. (5) Three extensions illustrate that the findings regarding the retailer’s blockchain adoption strategy remain robust under strict conditions.

Effects of information superiority and green optimism on green supply chains under different power structures

This paper examines the impact of information superiority, green optimism, and power structures on the decision making and performance of a green supply chain (GSC) comprised of a manufacturer and a retailer, either of which can be better informed than the other of consumers' green preference (CGP) and/or be the leader of the GSC. Using game theory and ex-post voluntary disclosure modeling, we derive optimal decisions regarding green efforts, wholesale and retail prices, and publicity levels. We also explicitly characterize the conditions under which it is more profitable for the more-informed party to disclose CGP information. We recognize that information superiority may not necessarily benefit the more-informed party, depending on the less-informed party's green optimistic bias and power structure. We further show that hidden superiority can improve environmental benefits and consumer surplus but is detrimental to the less-informed party. The environment and consumers may benefit from the manufacturer's dominance and an increase in CGP. However, the more-informed party also tends to hide information when CGP increases. We also demonstrate that revenue-sharing and bilateral cost-sharing (RSCS), and two-part tariff (TPT) contracts can effectively coordinate manufacturer-led and retailer-led GSCs, respectively. These contracts can lead to Pareto improvement in economic, environmental, and social benefits under hidden superiority. Our findings have important implications for GSC decision making and suggest practical solutions for coordination in both manufacturer-led and retailer-led GSCs.

Emission-reduction contract with cost information asymmetry for emission reduction service providers: Loose or tight

The asymmetry in emission reduction cost information introduces challenges to the supply chain of emission reduction outsourcing. To address this challenge, we construct principal–agent models of a manufacturer and an emission reduction service provider (ERSP), analyze loose two-part tariff and tight equity contracts, and investigate the contract design and decision distortion change of the manufacturer with information disadvantage when the ERSP faces the moral hazard of hiding emission reduction cost information. Results suggest that the manufacturer should adopt a tight equity contract to obtain higher profits in the presence of symmetric information, especially when the proportion of shareholding is high. However, when the shareholding ratio is low, the manufacturer should adopt a loose two-part tariff contract. Low-cost ERSP has more advantages than high-cost ERSP in concluding transactions. Before a deal is reached, the high-cost ERSP is motivated to hide emission reduction cost information to cooperate with the manufacturer. However, after a deal is reached, the low-cost ERSP is motivated to hide emission reduction cost information to gain higher emission reduction benefits. As a result, manufacturers are placed at an information disadvantage, which leads to the decision distortion of the two contracts. In other words, when cooperating with low- or high-cost ERSP and when the proportion of low-cost ERSP is relatively low, the emission reduction price and level are distorted upward. However, when cooperating the high-cost ERSP and when the proportion of low-cost ERSP is relatively high, the emission reduction price and level are distorted downward, and the tight equity contracts emerge as the dominant strategy.

Recycling channel design and coordination in a reverse supply chain with customer green preference

This study investigates the selection of recycling mode and the coordination mechanism in a reverse supply chain (RSC) that consists of one remanufacturer, one traditional recycler, and one smart recycler. We characterize the collection cost differences between traditional recycling and smart recycling, and the scrap rate of used products by smart recycling. We consider three recycling modes with recycling pricing competition, conditional on whether the remanufacturer collaborates with the traditional recycler, with the smart recycler, or with both recyclers. We show that the optimal recycling channel strategy for the remanufacturer is to enroll both the traditional recycler and the smart recycler, and the competition between these two recyclers exerts some non-trial implications on the firms’ equilibrium pricing strategy and profitability. By comparing the equilibrium outcomes with a centralized system, we further develop two coordination contracts: a two-part tariff contract and a transfer price combined with a profit-sharing contract, both of which can effectively mitigate double marginalization and improve the supply chain’s overall performance. Our findings provide useful guidance for the design of recycling channels, and for the coordination of RSC members to achieve Pareto improvement.

Exclusive and non-exclusive licensing with shelving

We consider a market of technology transfer and licensing with an outside innovator and two asymmetric potential licensees where the licensees have asymmetric absorptive capacities of a cost reducing innovation. The low-cost efficient licensee/firm can only benefit from the new technology if the size of the cost reducing innovation is strictly bigger than the cost difference from its competitor. The high-cost firm always benefits from the new technology regardless of the size of the innovation. This leads to the possibility of strategic shelving of the innovation by the efficient firm. Under this backdrop, we characterize the optimal licensing contracts of the outside innovator. We find that in equilibrium, the innovator will use a fixed fee contract for some parameters and royalty or two-part tariff contract(s) for other parameters. Equilibrium fixed fees and royalty rates will also vary depending on the cost asymmetry and the size of the innovation. The optimal licensing contracts can be exclusive or non-exclusive, and shelving of the new technology may or may not happen which has welfare implications. We also investigate the first- and second-best licensing contracts in this environment and discuss their possible implementation.

Innovation Diffusion and Strategic Outside Option in a Bargaining Game

AbstractWe develop an optimal licensing model of a product innovation in which the (external) patent holder negotiates sequentially a two-part tariff contract with two potential licensees that have a positive and strategic outside option. We study the role of this strategic outside option in determining technology diffusion and efficiency of the bargaining. Although rich enough contracts allow the solution of the well known opportunism problem, the strategic outside option of the second negotiator implies deviation from industry profit maximization, which reduces the profitability of nonexclusive licensing. As a result, exclusive licensing still prevails under certain conditions. We extend our analysis to assess the profitability for the innovator to integrate vertically with either firm in the market. The internal patent holder always sells the innovation to the rival non-affiliate as a way to co-opt the latter and improve the profits of the former. As a result, vertical integration as compared with vertical separation may imply a positive quality improving effect. The private and social profitability of vertical integration depends on the type of bargaining between the negotiators and on the distribution of their bargaining power.

Pricing coordination of a dual-channel supply chain considering offline in-sale service

With the rapid development of e-commerce, the problem of pricing conflicts between online and offline channels has become increasingly prominent. And the in-sale service has become an important factor influencing consumers' purchase decisions. To study the impact of in-sale service, this paper establishes a dual-channel supply chain model considering offline in-sale service. Using Stackelberg's game theory and backward induction, it solves the optimal pricing of supply chain members and makes comparisons in both cooperative and non-cooperative situations. Finally, it coordinates the supply chain through a two-part tariff contract. The results show that (1) The optimal wholesale price and offline retail price are positively correlated with in-sale service quality. And the opposite of the optimal online direct selling price. (2) With the quality of in-sale service improving, the retailer's profit will increase and then decrease but the manufacturer's profit will always decrease under non-cooperation. The total profit of the supply chain will rise and then fall under cooperation. (3) The two-part tariff coordination maximizes profits with the manufacturer reducing the wholesale price and the retailer paying a transfer cost. (4) Cooperative decision is better than the non-cooperative decision in terms of the supply chain as a whole.

Pricing and contract preference in maritime supply chains with downstream competition impact of risk-aversion and contract unobservability

The maritime market has been facing increasingly fierce competition. Most of the existing literature in maritime supply chain assumes that the details of the contracts between ports and carriers are common knowledge among all competing carriers. In reality, it is usually difficult for carriers to be fully aware of each other's contracts with ports. In view of this, we consider two representative contracts, namely wholesale price contact and two-tariff contract, construct a maritime supply chain with one port and two carriers, and analyze how risk-aversion behavior and contract unobservability impact the pricing and contract preference. We use passive beliefs as an equilibrium refinement criterion to solve the model. Our findings indicate that the carrier prefers the wholesale price contract, regardless of whether the contract is observable or not. The port tends to select the two-part tariff contract when the contract is observable. When faced with an unobservable contract, contract preference of the port depends on the competition intensity and degree of risk-aversion. Additionally, under the wholesale price contract, the port can benefit from the decrease of its risk-aversion coefficient and the increase of the carrier's risk-aversion coefficient, while the carrier is exactly the opposite. Meanwhile, the utility of the port can be increased or reduced by the increase in carrier's risk-aversion coefficient under the two-part tariff contract.

Price and Quantity Competition under Vertical Pricing

We consider a vertically related market where one quantity-setting and another price-setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that the price-setting firm produces a higher output and earns a higher profit than the quantity-setting firm when bargaining is decentralised. Additionally, both firms produce the same output, whereas the profit is higher under the price-setting firm than the quantity-setting firm when bargaining is centralised.

A stackelberg differential game theoretic approach for analyzing coordination strategies in a supply chain with retailer's premium store brand.

The online version contains supplementary material available at 10.1007/s10479-023-05372-9.