Myopic versus Farsighted Behaviors in a Low‐Carbon Supply Chain with Reference Emission Effects

Abstract

The increased carbon emissions cause relatively climate deterioration and attract more attention of governments, consumers, and enterprises to the low-carbon manufacturing. This paper considers a dynamic supply chain, which is composed of a manufacturer and a retailer, in the presence of the cap-and-trade regulation and the consumers’ reference emission effects. To investigate the manufacturer’s behavior choice and its impacts on the emission reduction and pricing strategies together with the profits of both the channel members, we develop a Stackelberg differential game model in which the manufacturer acts in both myopic and farsighted manners. By comparing the equilibrium strategies, it can be found that the farsighted manufacturer always prefers to keep a lower level of emission reduction. When the emission permit price is relatively high, the wholesale/retail price is lower if the manufacturer is myopic and hence benefits consumers. In addition, there exists a dilemma that the manufacturer is willing to act in a farsighted manner but the retailer looks forward to a partnership with the myopic manufacturer. For a relatively high price of emission permit, adopting myopic strategies results in a better performance of the whole supply chain.

An Optimal Control Model of the Low-Carbon Supply Chain: Joint Emission Reduction, Pricing Strategies, and New Coordination Contract Design

“…Since ignoring the time dependence, the impact of current decisions cannot generate on future performance in the static models. Hence, growing attention has been paid to the study of emission reduction strategies from the dynamic decision perspective [18]- [23]. For example, the impacts of myopic and farsighted behaviors have been investigated on the emission reduction strategies and the profits of supply chain members in [18].…”

“…Hence, growing attention has been paid to the study of emission reduction strategies from the dynamic decision perspective [18]- [23]. For example, the impacts of myopic and farsighted behaviors have been investigated on the emission reduction strategies and the profits of supply chain members in [18]. Accounting for the low-carbon promotions of retailers, the following literature has been discussed the joint emission reduction problems not covered in [18].…”

“…For example, the impacts of myopic and farsighted behaviors have been investigated on the emission reduction strategies and the profits of supply chain members in [18]. Accounting for the low-carbon promotions of retailers, the following literature has been discussed the joint emission reduction problems not covered in [18]. To be just a few, by applying the optimal control theory, the joint emission reduction problems have been explored in [19] for a retailer-led supply chain, in which the retailer spends a portion of emission reduction cost for the manufacturer.…”

Standard Setting with Considerations of Energy Efficiency Evolution and Market Competition

“…Accordingly, this paper aims to characterize EE standard setting and EE innovating equilibrium strategies of a policy maker and numerous competing producers, taking into consideration both a market differentiation framework and the evolving EE level. We establish a game between a policy maker and several producers in a vertical green supply chain [20,21]. Specifically, the game is playedà la Stackelberg with the policy maker acting as the leader and all the producers as the followers, and then the producers to decide the respective EE innovating strategy.…”

“…We consider the possible case(s) for a producer under a given EE standard about whether and when to enter the green market and investigate the respective optimal investment strategy via the approach of optimal control [20,22,23]. The study relates and contributes to researches of complex system from three aspects.…”