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Sustainability 2018, 10(2), 481; doi:10.3390/su10020481

Joint Pricing and Product Carbon Footprint Decisions and Coordination of Supply Chain with Cap-and-Trade Regulation

School of Management Engineering, Anhui Polytechnic University, Wuhu 241000, China
School of Economics and Business Administration, Chongqing University, Chongqing 400030, China
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200052, China
Author to whom correspondence should be addressed.
Received: 14 January 2018 / Revised: 6 February 2018 / Accepted: 6 February 2018 / Published: 11 February 2018
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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The implementation of cap-and-trade regulation worldwide is bound to have some effects on supply chain decision-making. This paper investigates optimal pricing and product carbon footprint decisions of the supply chain consisting of a manufacturer and a retailer under cap-and-trade regulation by applying optimization and game theory. By comparing the optimal results between the centralized and decentralized decision-making models, we find that the optimal product carbon footprint and selling price not only depend on the carbon trading price and carbon cap allocated by the government, but also relate to the initial carbon footprint of the product and the decision-making methods in the supply chain. It is found that there is also a “double marginalization” in the decentralized situation, thus we coordinate the supply chain using a two-part tariff contract. Specifically, only the manufacturer adjusts dynamically the wholesale price and fixed fee within the coordinating contract according to different initial carbon footprint and the range of the carbon cap reduction by the government. Finally, we obtain several interesting conclusions from the numerical examples and provide managerial insights and policy implications from the analytical results. View Full-Text
Keywords: cap-and-trade regulation; pricing; product carbon footprint; two-part tariffs contract cap-and-trade regulation; pricing; product carbon footprint; two-part tariffs contract

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Cheng, Y.; Xiong, Z.; Luo, Q. Joint Pricing and Product Carbon Footprint Decisions and Coordination of Supply Chain with Cap-and-Trade Regulation. Sustainability 2018, 10, 481.

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