Joint emission reduction dynamic optimization and coordination in the supply chain considering fairness concern and reference low-carbon effect

Ziyuan Zhang; Liying Yu

doi:10.3934/jimo.2021155

Article Contents

2022, Volume 18, Issue 6: 4201-4229. Doi: 10.3934/jimo.2021155

This issue Previous Article An orthogonal equivalence theorem for third order tensors Next Article An EOQ inventory model for deteriorating items with controllable deterioration rate under stock-dependent demand rate and non-linear holding cost

Joint emission reduction dynamic optimization and coordination in the supply chain considering fairness concern and reference low-carbon effect

Ziyuan Zhang and
Liying Yu^,

School of Management, Shanghai University, Shanghai, China

^* Corresponding author: Liying Yu
^* Corresponding author: Liying Yu

Received: April 2021

Revised: May 2021

Early access: September 2021

Published: November 2022

The first author is supported by the National Natural Science Foundation of China (NSFC) under Grants 12071280, 11671250.

Abstract / Introduction Full Text(HTML) Figure(5) / Table(3) Related Papers Cited by

Abstract

In the context of low-carbon economy, in order to explore the impact of the fairness concern and reference low-carbon effect on supply chain members' balanced emission reduction decisions and profits, supply chain joint emission reduction dynamic optimization models under four different scenarios are built, in which the manufacturer's optimal emission reduction strategy, the retailer's optimal low-carbon promotion strategy and other equilibrium solutions are solved by differential game theory. On the basis of analysis, a contract is designed to achieve the coordination of the supply chain when members are fairness concern. Some findings are as follows. First, when consumers' purchasing behavior is significantly affected by the reference low-carbon effect, and they have higher expectations for the product's emission reduction level, consumers' reference low-carbon effect will discourage the manufacturer's enthusiasm to reduce emissions, and do harm to the profits of the manufacturer and the retailer. Second, the fairness concern behavior of both parties will aggravate the adverse effects of reference low-carbon effect, bring a detrimental effect on the performance of the supply chain, aggravate the double marginal effect of the supply chain, and cause continuous negative social influence. Third, the bilateral cost-sharing contract can encourage the manufacturer to increase emission reduction investment, the retailer to increase low-carbon promotion investment, and can achieve a Pareto improvement of both parties' profits and utilities. In addition, the two cost-sharing ratios are only proportional to the marginal revenue and fairness concern intensity of both parties. Finally, when the two cost-sharing ratios and the revenue-sharing coefficient meet a certain relationship and are within a reasonable range, the bilateral cost sharing-revenue sharing hybrid contract can reduce the double marginal effect and achieve supply chain coordination.

Keywords:

Mathematics Subject Classification: Primary: 58F15, 58F17; Secondary: 53C35.

Citation:

Full Text(HTML)

Figure 1. The impact of the bilateral cost sharing-revenue sharing hybrid contract.(a)the effect of $ \tau_m $ and $ \tau_r $ on $ \theta $.(b)the effect of $ \theta $ on both parties' profits

Download: Full-size image PowerPoint slide

Figure 2. (a) The evolution path of low-carbon goodwill $ G(t) $.(b)The evolution path of reference low-carbon level $ R(t) $

Download: Full-size image PowerPoint slide

Figure 3. (a) The evolution path of the manufacturer's profit $ \pi_m(t) $.(b)The evolution path of the retailer's profit $ \pi_r(t) $.(c) The evolution path of overall supply chain profit $ \pi_{sc}(t) $.(d) The evolution path of the manufacturer's utility $ U_m(t) $.(e) The evolution path of the retailer's utility $ U_r(t) $.(f) The evolution path of the utility difference $ \Delta U(t) $

Download: Full-size image PowerPoint slide

Figure 4. (a) The impact of $ \tau_m $ and $ \tau_r $ on the low-carbon promotion cost-sharing ratio.(b)The impact of $ \tau_m $ and $ \tau_r $ on the emission reduction cost-sharing ratio.(c) The impact of $ \tau_m $ and $ \tau_r $ on the manufacturer's emission reduction investment.(d) The impact of $ \tau_m $ and $ \tau_r $ on the retailer's low-carbon promotion investment.(e) The impact of $ \tau_m $ and $ \tau_r $ on the manufacturer's profit $ \pi_m^f $. (f) The impact of $ \tau_m $ and $ \tau_r $ on the retailer's profit $ \pi_r^f $

Download: Full-size image PowerPoint slide

Figure 5. (a) The impact of $ \epsilon $ on the manufacturer's emission reduction investment.(b)The impact of $ \alpha $ and $ \epsilon $ on the manufacturer's emission reduction investment.(c) The impact of $ \tau_m $ and $ \epsilon $ on the manufacturer's emission reduction investment.(d) The impact of $ \tau_m $ and $ \alpha $ on the manufacturer's emission reduction investment.(e) The impact of $ \alpha $ and $ \epsilon $ on the manufacturer's profit $ \pi_m^f $. (f) The impact of $ \alpha $ and $ \epsilon $ on the retailer's profit $ \pi_r^f $.(g) The impact of initial reference low-carbon level $ R_0 $ on the manufacturer's profit.(h) The impact of initial reference low-carbon level $ R_0 $ on the retailer's profit

Download: Full-size image PowerPoint slide

Table 1. Some literature most relevant to this paper

Author	Reference Low Carbon on Effect	Fairness Concern	Low Carbon Goodwill	Supply Chain Coordination
Wang et al. [28]	$\surd$
Liu et al. [18]		$\surd$		$\surd$
Yu et al. [32]	$\surd$
Zhang et al. [41]		$\surd$
Zou et al. [45]		$\surd$
This paper	$\surd$	$\surd$	$\surd$	$\surd$

| Show Table

DownLoad: CSV

Table 2. Related parameters and decision variables

Decision variables	Definition
$ E(t) $	Manufacturer's emission reduction investment at time $ t $
$ A(t) $	Retailer's low-carbon promotion investment at time $ t $
Parameters	Definition
$ \alpha $	Influence coefficient of reference low-carbon effect on the demand
$ \beta $	Influence coefficient of manufacturer's emission reduction on the demand
$ k $	Influence coefficient of retailer's low-carbon promotion on the demand
$ \rho $	Discount rate
$ \mu $	Influence coefficient of low-carbon goodwill on the demand
$ \pi_1 $	Manufacturer's marginal revenue
$ \pi_2 $	Retailer's marginal revenue
$ G(t) $	Low-carbon goodwill level at time $ t $
$ R(t) $	Consumer's reference low-carbon level at time $ t $
$ \lambda $	Influence coefficient of the low-carbon promotion on the low-carbon goodwill
$ \sigma $	Natural decay rate of low-carbon goodwill
$ \epsilon $	Memory parameter
$ \phi $	Low-carbon promotion Cost-sharing ratio
$ \gamma $	Emission reduction cost-sharing ratio
$ \theta $	Revenue-sharing coefficient under the supply chain coordination
$ \tau_m $	Manufacturer's fairness concern intensity
$ \tau_r $	Retailer's fairness concern intensity
$ \eta_m $, $ \eta_r $	Emission reduction cost coefficient and low-carbon promotion cost coefficient.

| Show Table

DownLoad: CSV

Table 3. The relationship between related parameters

	$ \pi_1 $	$ \pi_2 $	$ \tau_m $	$ \tau_r $	$ \eta_m $	$ \eta_r $	$ \alpha $	$ \beta $	$ k $	$ \epsilon $	$ \sigma $	$ \lambda $	$ \mu $	$ \rho $
$ E $	$ + $	$ - $	$ - $	$ \times $	$ - $	$ \times $	$ + $	$ + $	$ \times $	$ - $	$ \times $	$ \times $	$ \times $	$ + $
$ A $	$ - $	$ + $	$ \times $	$ - $	$ \times $	$ - $	$ \times $	$ \times $	$ + $	$ \times $	$ - $	$ + $	$ + $	$ - $
$ G_{\infty} $	$ - $	$ + $	$ \times $	$ - $	$ \times $	$ - $	$ \times $	$ \times $	$ + $	$ \times $	$ - $	$ + $	$ + $	$ - $
$ R_{\infty} $	$ + $	$ - $	$ - $	$ \times $	$ - $	$ \times $	$ + $	$ + $	$ \times $	$ - $	$ \times $	$ \times $	$ \times $	$ + $

| Show Table

DownLoad: CSV

Related Papers

Cited by

References

[1]	C. K. Anderson, H. Rasmussen and L. Macdonald, Competitive pricing with dynamic asymmetric price effects, Int. Trans. Oper. Res., 12 (2005), 509-525. doi: 10.1111/j.1475-3995.2005.00522.x.
[2]	E. Bendoly, K. Donohue and K. L. Schultz, Behavior in operations management: Assessing recent findings and revisiting old assumptions, J. Operations Management, 24 (2006), 737-752.
[3]	S. Benjaafar, Y. Z. Li and M. Daskin, Carbon footprint and the management of supply chains: Insights from simple models, IEEE Transactions on Automation Science and Engineering, 10 (2013), 99-116.
[4]	K. Y. Cao, B. Xu, Y. He and Q. Y. Xu, Optimal carbon reduction level and ordering quantity under financial constraints, Int. Trans. Oper. Res., 27 (2020), 2270-2293. doi: 10.1111/itor.12606.
[5]	C. Y. Dye, C. T. Yang and C. C. Wu, Joint dynamic pricing and preservation technology investment for an integrated supply chain with reference price effects, J. Operational Research Society, 69 (2018), 811-824.
[6]	S. F. Du, L. Hu and L. Wang, Low-carbon supply policies and supply chain performance with carbon concerned demand, Ann. Oper. Res., 255 (2017), 569-590. doi: 10.1007/s10479-015-1988-0.
[7]	S. F. Du, C. Du and L. Liang, Supply chain coordination considering fairness concerns, Journal of Management Sciences in China, 13 (2010), 41-48.
[8]	G. Fibich, A. Gavious and O. Lowengart, Explicit solutions of optimization models and differential games with nonsmooth (asymmetric) reference-price effects, Oper. Res., 51 (2003), 721-734. doi: 10.1287/opre.51.5.721.16758.
[9]	A. Gavious and O. Lowengart, Price-quality relationship in the presence of asymmetric dynamic reference quality effects, Marketing Letters, 23 (2012), 137-161.
[10]	D. Ghosh and J. Shah, Supply chain analysis under green sensitive consumer demand and cost sharing contract, International Journal of Production Economics, 164 (2015), 319-329.
[11]	H. Huang, J. Zhang, X. Ren and X. Zhou, Greenness and pricing decisions of cooperative supply chains considering altruistic preferences, Int. Journal of Environmental Research and Public Health, 16 (2019), 51.
[12]	Q. Han, Y. Y. Wang, L. Shen and Y. Wang, Decision and coordination of low-carbon e-commerce supply chain with government carbon subsidies and fairness concerns, Complexity, 2020 (2020), 1-19.
[13]	W. Jiang and X. Chen, Optimal strategies for low carbon supply chain with strategic customer behavior and green technology investment, Discrete Dyn. Nat. Soc., 2016 (2016), 1-13. doi: 10.1155/2016/9645087.
[14]	P. K. Kopalle and R. S. Winer, A dynamic model of reference price and expected quality, Marketing Letters, 7 (1996), 41-52.
[15]	G. W. Liu, S. P. Sethi and J. X. Zhang, Myopic vs. far-sighted behaviours in a revenue-sharing supply chain with reference quality effects, International J. Production Research, 54 (2018), 1334-1357.
[16]	Z. Liu, L. L. Lang, b. Hu, L. H. Shi, B. T. Huang and Y. J. Zhao, Emission reduction decision of agricultural supply chain considering carbon tax and investment cooperation, J. Cleaner Production, 294 (2021), 126305.
[17]	L. Liu and F. T. Li, Differential game modelling of joint carbon reduction strategy and contract coordination based on low-carbon reference of consumers, J. Cleaner Production, 277 (2020), 123798.
[18]	Z. Liu, X. X. Zheng, B. G. Gong and G. Y. Miao, Joint decision-making and the coordination of a sustainable supply chain in the context of carbon tax regulation and fairness concerns, International Journal of Environmental Research and Public Health, 14 (2017), 1464.
[19]	C. H. Loch and Y. Z. Wu, Social preferences and supply chain performance: An experimental study, Management Science, 54 (2008), 1835-1849.
[20]	L. H. Lu, Q. L. Gou, W. S. Tang and J. X. Zhang, Joint pricing and advertising strategy with reference price effect, International Journal of Production Research, 54 (2016), 5250-5270.
[21]	Z. B. Lin, Price promotion with reference price effects in supply chain, Transportation Research Part E-Logistics and Transportation Review, 85 (2016), 52-68.
[22]	Q. Q. Li, T. J. Xiao and Y. Z. Qiu, Price and carbon emission reduction decisions and revenue-sharing contract considering fairness concerns, J. Cleaner Production, 190 (2018), 303-314.
[23]	X. J. Pu, Z. P. Song and G. H. Han, Competition among supply chains and governmental policy: Considering consumers' low-carbon preference, International Journal of Environmental Research and Public Health, 15 (2018), 1985.
[24]	X. H. Qian, F. T. S. Chan, J. H. Zhang, M. Yin and Q. Zhang, Channel coordination of a two-echelon sustainable supply chain with a fair-minded retailer under cap-and-trade regulation, J. Cleaner Production, 244 (2020), 118715.
[25]	Y. Y. Wang, R. J. Fan, L. Shen and M. Z. Jin, Decisions and coordination of green e-commerce supply chain considering green manufacturer's fairness concerns, International J. Production Research, 58 (2020), 7471-7489.
[26]	Z. R. Wang, A. E. I. Brownlee and Q. H. Wu, Production and joint emission reduction decisions based on two-way cost-sharing contract under cap-and-trade regulation, Computers & Industrial Engineering, 146 (2020), 106549.
[27]	C. X. Wang, W. Wang and R. B. Huang, Supply chain enterprise operations and government carbon tax decisions considering carbon emissions, J. Cleaner Production, 152 (2017), 271-280.
[28]	J. Wang, X. X. Cheng, X. Y. Wang, H. T. Yang and S. H. Zhang, Myopic versus farsighted behaviors in a low-carbon supply chain with reference emission effects, Complexity, 2019 (2019), 3123572.
[29]	L. J. Xia, Y. W. Bai, S. Ghose and J. J. Qin, Differential game analysis of carbon emissions reduction and promotion in a sustainable supply chain considering social preferences, Annals of Operations Research, 2020. doi: 10.1007/s10479-020-03838-8.
[30]	L. J. Xia, T. T. Guo, J. J. Qin, X. Yue and Z. Ning, Carbon emission reduction and pricing policies of a supply chain considering reciprocal preferences in cap-and-trade system, Ann. Oper. Res., 268 (2018), 149-175. doi: 10.1007/s10479-017-2657-2.
[31]	J. Xu and N. Liu, Erratum to: Research on closed loop supply chain with reference price effect, J. Intelligent Manufacturing, 28 (2017), 51-64.
[32]	B. Q. Yu, J. Wang, X. M. Lu and H. T. Yang, Collaboration in a low-carbon supply chain with reference emission and cost learning effects: Cost sharing versus revenue sharing strategies, Journal of Cleaner Production, 250 (2020), 119460.
[33]	S. Yu and Q. Hou, Supply chain investment in carbon emission-reducing technology based on stochasticity and low-carbon preferences, Complexity, 2021 (2021), 1-18.
[34]	H. Q. Zhang, P. Li, H. Zheng and Y. X. Zhang, Impact of carbon tax on enterprise operation and production strategy for low-carbon products in a co-opetition supply chain, J. Cleaner Production, 287 (2021), 125058.
[35]	L. H. Zhang, J. G. Wang and J. X. You, Consumer environmental awareness and channel coordination with two substitutable products, European J. Oper. Res., 241 (2015), 63-73. doi: 10.1016/j.ejor.2014.07.043.
[36]	Z. C. Zhang, Q. Zhang, Z. Liu and X. X. Zheng, Static and dynamic pricing strategies in a closed-loop supply chain with reference quality effects, Sustainability, 10 (2018), 157.
[37]	Z. Y. Zhang, D. X. Fu and Q. Zhou, Optimal decisions of a green supply chain under the joint action of fairness preference and subsidy to the manufacturer, Discrete Dyn. Nat. Soc., 2020 (2020), 1-18. doi: 10.1155/2020/9610503.
[38]	Z. Y. Zhang and L. Y. Yu, Dynamic optimization and coordination of cooperative emission reduction in a dual-channel supply chain considering reference low-carbon effect and low-carbon goodwill, International Journal of Environmental Research and Public Health, 18 (2021), 539.
[39]	J. Zhang, W. Y. K. Chiang and L. Liang, Strategic pricing with reference effects in a competitive supply chain, Omega-International Journal of Management Science, 44 (2014), 126-135.
[40]	J. Zhang, Q. L. Gou, L. Liang and Z. Huang, Supply chain coordination through cooperative advertising with reference price effect, Omega-International Journal of Management Science, 41 (2013), 345-353.
[41]	L. H. Zhang, B. W. Xue and X. Y. Liu, Carbon emission reduction with regard to retailer's fairness concern and subsidies, Sustainability, 10 (2018), 1209.
[42]	Y. Zhang, J. Y. Li and B. Xu, Designing buy-online-and-pick-up-in-store (bops) contract of dual-channel low-carbon supply chain considering consumers' low-carbon preference, Math. Probl. Eng., 2020 (2020), 15pp. doi: 10.1155/2020/7476019.
[43]	X. D. Zhou, B. Xu, F. Xie and L. Yu, Research on quality decisions and coordination with reference effect in dual-channel supply chain, Sustainability, 12 (2020), 2296.
[44]	Y. J. Zhou, M. J. Bao, X. H. Chen and X. H. Xu, Co-op advertising and emission reduction cost sharing contracts and coordination in low-carbon supply chain based on fairness concerns, J. Cleaner Production, 133 (2016), 402-413.
[45]	H. Zou, J. Qin and B. Dai, Optimal pricing decisions for a low-carbon supply chain considering fairness concern under carbon quota policy, International Journal of Environmental Research and Public Health, 18 (2021), 556.
[46]	Y. Zu and L. Chen, Myopic versus far-sighted behaviors in dynamic supply chain coordination through advertising with reference price effect, Discrete Dyn. Nat. Soc., 2017 (2017), 1-15. doi: 10.1155/2017/9759561.