Two-Stage Supply-Chain Optimization Considering Consumer Low-Carbon Awareness under Cap-and-Trade Regulation

Abstract

Cap-and-trade regulation is an effective mechanism to control carbon emissions. The optimization problem for a two-stage supply chain consisting of a manufacturer and a retailer under cap-and-trade regulation was investigated in this paper. Consumers' low-carbon awareness level was considered in the decision models. Optimal decision policies, corresponding emissions, and profits were calculated for decentralized and centralized decision-making modes. Under a decentralized mode, the two-stage supply-chain optimization problem was formulated as a Stackelberg game model, where the manufacturer and retailer were the leader and follower, respectively. The manufacturer decides the emission-reduction levels per product unit and the retailer decides the retail price per unit product. The optimal decisions are derived using the reverse-solution method. By contrast, the two-stage supply-chain optimization problem under a decentralized mode was formulated as a single-level optimization model. The nonlinear model is handled by KKT optimality conditions. The influence of the regulation parameters (caps and carbon prices) and consumers' low-carbon awareness on the optimal decision policies, the corresponding emissions, and profits is discussed in detail. A comparison between the two modes implies that the decentralized mode is dominated by the centralized mode in terms of profit and emissions. In order to provoke the decision makers under decentralized modes to make the decisions under the decentralized mode, a profit-sharing contract was designed. This study shows that higher consumer low-carbon awareness and carbon prices can improve the manufacturer-decision flexibility when there exists a profit-sharing contract. Finally, numerical experiments confirmed the analytical results.

Joint Emission Reduction Strategy in Green Supply Chain under Environmental Regulation

“…The reverse-solution method for the Stackelberg game is used to solve the problem. The same method can be referred to as Ghosh et al [5], Tao [9], Xue et al [56], Dong et al [63] and Liu and Nishi [64]. Accordingly, we can obtain the following conclusions.…”

“…To explain further, it is easy to obtain the 'low hanging fruit' for firms during greening while subsequent greening improvements will be incrementally more difficult. Without loss of generality, we set c(θ) = Iθ 2 to express the diminishing marginal return of the green level concerning the investment, where I denotes the cost coefficient of the green level [1,9,56,60,61]. Similarly, the green-marketing investment of the retailer is noted as a non-decreasing convex function of the advertising effort s, i.e., c(s) = ms 2 , where m represents the cost coefficient of advertising effort [41].…”

“…With the concern of social responsibility, environmental regulations and consumers' green preference, the players in the supply chain are facing a more complex and uncertain market environment. It is worth noting that, as a part of the supply chain, the effect of emission reduction by firms individually is limited [9]. Self-interested emission reduction action without coordination with other firms is difficult to minimize the carbon emissions of the supply chain.…”

The Optimal Combination between Recycling Channel and Logistics Service Outsourcing in a Closed-Loop Supply Chain Considering Consumers’ Environmental Awareness

“…Lyu, et al [17] used the KKT conditions to constrain carbon emissions under a strict carbon-cap and within the recycling context. Tao [27] formulated the two-stage supply-chain optimization problem under a decentralized model as a single-level optimization model. The nonlinear model is handled by KKT.…”

A Multistage Sustainable Production–Inventory Model with Carbon Emission Reduction and Price-Dependent Demand under Stackelberg Game

“…Jaggi et al [33] incorporated deteriorating items to obtain optimal inventory and credit decisions using the Stackelberg and Nash equilibrium solutions. Tao [34] studied the optimization problem for a two-stage supply chain under a decentralized decision-making mode that allowed the formulation of the problem as a Stackelberg game model, where the manufacturer and retailer were the leader and follower, respectively. Zhang et al [35] established a three-stage pricing model with a third-party logistic enterprise as the leader, whereas the retailer and the consumer were the followers.…”