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This paper investigates the optimal decision of selling price and carbon footprint in two-echelon supply chain under cap-and-trade regulation, which consists of one-single manufacturer and one-single retailer. Comparing the decisions and profits in the centralized and decentralized scenarios, we try to propose a side-payment self-enforcing contract...
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... occurs because consumers focusing on carbon footprint for unit product directly reduce the willingness to purchase for consumers, which means supply chain has the motivation to reduce selling price to increase the demand and maximize own profit. Figure 2 indicates that the impact of consumer's awareness to carbon footprint on optimal carbon footprint in the centralized and decentralized scenarios. Please note that, the optimal carbon footprint in centralized scenario is lower than that of decentralized scenario, which means that every member in decentralized scenario focus on the maximization of their individual profit to result in the double marginalization and reducing total profit. ...
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Citations
... Assumption 4. Carbon emission reduction investment is a long-term investment project, and it is difficult to make substantial breakthroughs in the short term compared with pricing decision. Therefore, referring to the solution method of Xu et al. (2019), it is assumed that the order of optimal carbon emission reduction decisions takes precedence over pricing decisions. ...
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... Liu et al. [40] investigated the impact of the carbon price and consumer environmental preference on optimal decisions of a supply chain with emissions-sensitive demand. Under cap-and-trade policy, Xu et al. [41] proposed a two-echelon supply chain, and showed that the customer's awareness and the initial amount of carbon emission have a negative impact on the selling price, whereas the trading price of carbon cap has a positive impact on the selling price. Qian et al. [42] presented a coordination problem in a two-echelon sustainable supply chain which incorporates a socially responsible manufacturer and a fair-minded retailer. ...
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... As a result, using low-carbon technologies will not only result in less carbon emission but bring in greater profitability. Xu et al. (2019) investigated the optimal decision and carbon emission under CTR and achieved a Pareto improvement by carbon reduction investment, and they have not studied specific carbon footprint. ...
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Global warming has become an issue of increasing worldwide concern. At present, the most direct way to solve this problem is to control carbon emissions. In our paper, carbon tax policy is injected into a two-stage supply chain consisting of one manufacturer and two retailers. We establish six game models according to the relationship (competitive or cooperative) between the retailers and three power structures (manufacturer Stackelberg (MS), retailer Stackelberg (RS), and vertical Nash (VN)) between the two retailers and the manufacturer. We then adopt the inverse induction method to derive optimal pricing decisions for each model. Optimal profits for supply chain members are obtained. Finally, we analyse: i) the effects of competition and cooperation between the two retailers on equilibrium results; ii) the effects of the three possible power structures existing between the manufacturer and the two retailers on equilibrium results; and especially iii) the effect of the carbon tax rate on pricing decision and the profits of the supply chain. We find that the different power structure and the horizontal relationship between the two retailers have important influence on equilibrium results. Further, the change of carbon tax rate have different influence on pricing under the different power structure and the horizontal relationship between the two retailers. When the government adjusts the carbon tax rate, it should fully consider the different power structure and the horizontal relationship for two-stage supply chain consisting of one manufacturer and two retailers. Although the implementation of the carbon tax policy reduces the corporate profits, it reduces the total carbon emission. The carbon tax policy is helpful to build an environment-friendly and resource-conserving society.
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This paper studies a two-echelon supply chain consisting of a retailer and a manufacturer under carbon emission reduction target and carbon cap-and-trade policy. The unit production cost varies when carbon price fluctuates. We find that carbon price fluctuations affect the original optimal production decision in the supply chain. We also compare how this disturbance affects the supply chain operations under three different power structures with a focus on the profitability and robustness.
1. Introduction
Following the concept of sustainable development, low-carbon economy requires all sectors of society to assume their environmental responsibility. Governments control and coordinate carbon footprints through market mechanisms and strongly support firms to invest in carbon emission reduction. Furthermore, whether the product is environmentally friendly is one of the factors taken into consideration in consumers’ decision of purchase. All these environmentally responsible factors will directly affect the firms of manufacturers and retailers. So much attention has been drawn to how supply chains composed of manufacturers and retailers undertake the environmental responsibility and how the environmental responsibility affects their operations and profitability.
In fact, environmental responsibility as part of the corporate social responsibility has historically been a significant theme in academic research [1, 2]. The environmental responsibility of firms is reducing their carbon footprints below the carbon caps. Commonly they use methods including carbon emission reduction investment or carbon cap-and-trade. The United Nations Climate Change Conference COP 25 (2–13 December 2019) failed to reach a consensus on the implementation details of the market-based carbon cap-and-trade policy due to the different preferences between countries. The lack of implementation details has brought challenges to the subsequent development of the carbon trading market. Although governments have not reached an agreement on carbon trading matters, the firms have already begun to take actions on carbon emission reduction. Many well-known firms in the world have publicly announced their carbon emission reduction investment goals on their official websites. For example, automotive technology supplier Bosch has publicly disclosed that it will purchase a large amount of green power and increase its investment in renewable power to realize the carbon neutrality in the year of 2020. The household product retailer IKEA stated that it would be carbon neutral by 2030 and the e-business platform Amazon certified that half of its transportation would achieve zero carbon footprints by 2030. Even Shell, the oil firm that faces big difficulty in reducing carbon footprints, has promised to reduce 50% of its carbon footprints by 2050.
For firms, both carbon emission reduction investment and carbon cap-and-trade will directly affect their costs. Whether to invest in carbon emission reduction or not and the level of the investment are both controllable factors for firms in their production decisions. However, carbon trading is affected by market factors. Whether the carbon trading markets are efficient or not, there must be fluctuations in carbon prices, which is the uncontrollable factor for firms that need extra carbon emission rights. Carbon price fluctuations will cause cost disturbance in the production process, which will cause cost deviation and change the original optimal production decision. Therefore, this paper will focus on how carbon price fluctuations affect the operations and profitability of supply chains.
Furthermore, the power structures of the supply chain in the real economy are not the same, and the supply chains under different power structures have different reactions to cope with cost disturbance caused by carbon price fluctuations. In this paper, we take a two-echelon supply chain including a manufacturer and a retailer as examples. For the manufacturer and the retailer, their different market scales become the bargaining weight of leadership in their supply chain. Generally, this type of two-echelon supply chain has the following three different power structures: a centralized supply chain, a retailer-leading supply chain where downstream retailers have stronger bargaining power, and a manufacturer-leading supply chain where upstream manufacturers have stronger bargaining power. A similar setting that consists of a manufacturer and a retailer has been adopted by Wang et al. [3], Zhang et al. [4], and Zheng et al. [5]. Under different power structures, the changes of supply chain operations, profitability, and robustness are worthy of attention.
In summary, this paper focuses on a two-echelon supply chain with one manufacturer and one retailer under the cost disturbance caused by carbon price fluctuations. We compare the supply chain operations, profitability, and robustness under three different power structures in response to cost disturbance caused by carbon price fluctuations.
This paper is structured as follows: Following the introduction is literature review. Section 3 presents the assumptions and notation of the models. Section 4 presents the baseline models without cost disturbance and Section 5 presents the cost disturbance models under carbon price fluctuations. In order to illustrate the models in Sections 4 and 5, we conduct numerical examples in Section 6. Section 7 presents the conclusion.
2. Literature Review
2.1. Supply Chain Management under Carbon Cap-and-Trade Policy
Supply chain management under carbon cap-and-trade policy has gained much attention since the last decade. The implementation of cap-and-trade policy is crucial for supply chains to make operation decisions [6]. Existing research tends to be fragmented on carbon trade in the supply chain management. Both Martí et al. [7] and Zakeri et al. [8] focus on the difference between carbon cap-and-trade policy and carbon tax policy, which will affect the operations of supply chains [9]. The carbon cap-and-trade policy is often related to environmental protection and green concepts; for example, Jiang and Chen [10] proposed a supply chain model with both green technology investment and cap-and-trade policy; Chen and Wang [11] examined how carbon trade influences green product mix decision. Wang et al. [12, 13] considered the effect of carbon trade on the operations of fresh food supply chains. Jiang et al. [10] and Yuan et al. [14] set up a supply chain system with carbon trade to examine the problem of carbon information asymmetry. Cheng et al. [6] and Xu et al. [15] did research on the impacts of carbon cap-and-trade policy on supply chain systems under the centralized and decentralized operation modes. Pang et al. [16] and Wang et al. [17] introduced consumer environmental awareness into the study of supply chains with carbon trade. There are also some researches on carbon trade referring to make-to-order supply chain [18, 19], multiperiod supply chain [20], take-back regulations [21], supply chain with yield uncertainty [22], and supply chain with side-payment contract [23].
2.2. Supply Chain Management with Disturbance
The issue of supply chain disturbance management has received much attention recently. In terms of demand disturbance, the research usually focuses on the direct demand disturbance, market share disturbance, and retail price sensitive disturbance. Among them, direct demand disturbance, that is, sudden increase or decrease in market demand, has received the biggest attention in recent years. Chen et al. [24] paid attention to the influence of direct demand disturbance in a complex supply chain system under the competitive environment. Shen and Li [25] used direct demand disturbance and supply disturbance as the composition of market disturbance to study the possible risks of supply chains under disturbance. Huang and Wang [26] studied the influence of direct demand disturbance in the closed-loop supply chain. Rahmani and Yavari [27] focused on the impact of direct demand disturbance on the green product supply chain and calculated the value of knowing the demand disturbance in advance. Unlike the aforesaid research, Wang et al. [28] and Ali et al. [29] studied demand disturbance due to changes in market size. The mode of demand disturbance in Zheng et al. [30] research is caused by changes of market size and consumers’ retail prices sensitivity. Compared with direct demand disturbance, which treats demand disturbance as a black box, the latter two types of demand disturbances are more reasonable. In particular, market demand disturbance caused by the consumers’ retail prices sensitivity can reflect consumers’ purchasing psychology and is more in line with the real economy.
In terms of cost disturbance, most of the existing researches focused on the direct production cost disturbance. Sardar and Lee [31] studied the impacts of the direct production cost disturbance on the supply chain in the fast fashion garment. Some scholars focused on the cost disturbance in the closed-loop supply chain. For example, Han et al. [32] examined the robustness when the cost disturbance occurred in closed-loop supply chain; Huang and Wang [33] considered a closed-loop supply chain with online and offline channel under the cost disturbance; Wu et al. [34] set up a retailer competition environmental closed-loop supply chain with cost disturbance. Many researches on cost disturbance also consider demand disturbance at the same time. For instance, Zhang et al. [35] focused on the dual-channel (direct sales and retail sales) sales supply chain under dual disturbance; Zhang et al. [36] studied supply chain operations when suppliers bear cost disturbance and retailers bear demand disturbance; Cao et al. [37] set up a retailers’ competition environment to examine how the supply chain reacts to the dual disturbance. Soleimani et al. [38] studied the differences of pricing strategy under cost and demand disturbance between centralized and decentralized operation supply chains. Tang et al. [39] compared different operations of supply chains with and without revenue sharing contracts. The above literature on supply chain disturbance management mainly focuses on direct production cost disturbance and assumes that carbon price is fixed in carbon trade market. However, the impact of carbon trade and cost disturbance on supply chains in the real economy will be much more complicated. Thus, it is very meaningful to focus on these kinds of supply chains.
The contributions of this research are twofold:(1)By introducing carbon cap-and-trade policy into a two-echelon supply chain, we can study the case when the carbon price fluctuates. This paper assumes that the carbon trade market is not completely efficient and there exists speculation in the market, leading to differences between actual and equilibrium carbon prices. We focus on the impact of carbon price fluctuations on the operations of the supply chain. Fluctuated carbon prices furnish an alternative approach to accommodating cost disturbance in the supply chain on top of the traditional direct production cost disturbance.(2)We consider three cases for the two-echelon supply chain. In the centralized case, a central planner makes operational decisions to maximize the channel profit. In the two decentralized cases, there are two Stackelberg game sets where the manufacturer and the retailer are, respectively, assumed to be the leader in the supply chain. Though previous researches have also taken the different supply chain power structures into consideration, enterprises’ environmental responsibility, consumers’ environmental awareness, and carbon price fluctuations have not been considered together at the same time. Base on the consideration of enterprises’ environmental responsibility and consumers’ environmental awareness, this paper examines how different power structures affect the supply chain operations under cost disturbance due to carbon price fluctuations.
3. Model Assumptions and Notation
We focus on a two-echelon supply chain with one manufacturer and one retailer. Among them, the manufacturer makes carbon emission reduction investment and the cost disturbance caused by carbon price fluctuations will be directly reflected in the profit of the manufacturer. To study the changes of the supply chain operations under cost disturbance caused by carbon price fluctuations, we employ the notations in Table 1 and the following assumptions.
Given parameters
c
Unit cost of a product,
p
Retail price,
Manufacturer wholesale price,
m
Retailer marginal profit,
q
Production quantity,
Consumer valuation of the product,
e
Sensitivity coefficient of carbon emission reduction level (consumers’ environmental awareness),
r
Carbon emission reduction investment level, (assume that the carbon emission per unit product is 1 and consider the manufacturer as the demand side of carbon emission rights)
R
Carbon emission cap,
t
Carbon price,
o
Carbon price fluctuation
Shortage cost
Inventory cost
U
Consumer’s utility function
d
Demand function
Profit function
Superscripts/subscripts
()
Optimal result without carbon price fluctuations
()
Optimal result with carbon price fluctuations
()
The result of centralized supply chain
()
The result of retailer-leading decentralized supply chain
()
The result of manufacturer-leading decentralized supply chain
The profit of retailer in the decentralized supply chain
The profit of manufacturer in the decentralized supply chain
... In general, the less recycling capacity tends to decrease the collection ability in the reverse channel. Note that this situation may result in a phenomenon, which undercuts corporate profit aggravate environmental harm [6][7][8][9]. Furthermore, based on managerial insight, realistically, the imposing capacity constraints will change the manufacturing and remanufacturing process. ...
This paper explores the decision-making and coordination mechanism of pricing and collection rate in a closed-loop supply chain with capacity constraint in recycling channels, which consists of one manufacturer and one retailer. On the basis of game theory, the equilibriums of decisions and profits in the centralized and decentralized scenarios are obtained and compared. Through the performance analysis of a different scenario, a higher saving production cost and lower competition intensity trigger the members to engage in remanufacturing. Furthermore, we try to propose a two-part tariff contract through bargaining to coordinate supply chain and achieve a Pareto improvement. The results show that when the capacity constraints in recycling channels exceed a threshold, the decisions and profit will change. Additionally, for closed-loop supply chain, the selling price is more susceptible to the influence of capacity constraint in recycling channel than the members’ profit.
Supply Chain and distribution management has gained prominence in a global economy. The pricing decisions are widely seen at the heart of a supply chain with an augmented growth of interest. This paper presents a systematic literature review of pricing models in supply chain focusing on quantitative models. Using contemporary bibliometric analysis tools, we have systematically analyzed over 639 peer-reviewed articles from leading journals. An exploratory analysis of the articles is presented to uncover the fundamental features such as: influential authors, productive countries, publication growth, yearly publication growth, among others. A visualization of these articles is performed using a network analysis. Two co-citation network analyses are performed to reveal the clusters (topics) based on modularity and centrality performance measures. Later, this analysis is supported with the dynamic co-citation analysis to elaborate the evolution of the research clusters over time. A keyword co-occurrence network is also presented to determine the emerging trends. A cluster-based content analysis is conducted on to find out the significance of the current themes and emerging trends along with the influential groups. Findings from the proposed systematic analysis aid illustrating how research has evolved over time and point to the potential future themes.
Purpose
This paper aims to explore how upstream supply chain companies will control the carbon emissions and price decisions of products when the government implements environmental tax policy on consumers. It provides some suggestions to control carbon emissions for the government and manufacturers.
Design/methodology/approach
This study establishes two-echelon Stackelberg game models with and without the implementation of environmental tax policy on consumers in a centralized scenario and a decentralized scenario. Through the comparative analysis of the four models, the optimal emission abatement and pricing strategies are obtained.
Findings
This paper concludes that implementing environmental tax policy on consumers within the market’s acceptable range is more beneficial to the retailer and the environment, as well as the overall social welfare, except for the manufacturer. Moreover, consumer’s low-carbon preference always has a broader impact on carbon abatement and corporate profits than environmental tax coefficient. Finally, the side-payment self-executing contract can effectively ensure that the supply chain members make rational decisions spontaneously while achieving a win-win solution of centralized scenario.
Originality/value
This paper first considers how the government’s environmental tax policy on consumers will affect the decision-making of supply chain companies, and proposes an improved side-payment self-enforcing contract to maximize environmental and economic benefits of centralized scenario. In addition, it provides a reference for the government to adopt both the carbon cap policy and the environmental tax policy.
Considering the capacity constraints of reverse channels, this paper explores the influences of channel competition and collection choice on the optimal strategies and profits of closed-loop supply chain (CLSC), in which consists of a manufacturer and two symmetric retailers. Based on the game theory, we design four different scenarios: Neither retailer collects (NN), only a retailer collects (CN/NC) and both retailers collect (CC). On this basis, we find that the higher saving cost and lower competition intensity are incentive to the retailer to recycle. Further, if both the retailers are with constrained capcaities , the same strategies can bring the significant profit improvement; nevertheless, when the strategies are inconsistent, they may suffer a loss of profits. In addition, we try to coordinate the supply chain through two-part tariff contract to achieve Pareto improvement.
