Differential decision of low-carbon supply chain based on market preferences with fairness concerns

Qunli Wu; Jianglin Xia

doi:10.3934/jimo.2022122

Article Contents

2023, Volume 19, Issue 6: 4064-4094. Doi: 10.3934/jimo.2022122

This issue Previous Article Mean-variance asset-liability management under CIR interest rate and the family of 4/2 stochastic volatility models with derivative trading Next Article A proximal quasi-Newton method based on memoryless modified symmetric rank-one formula

Differential decision of low-carbon supply chain based on market preferences with fairness concerns

Qunli Wu and
Jianglin Xia^,

Department of Economics and Management, North China Electric Power University, Baoding 071003, China

^*Corresponding author: Jianglin Xia
^*Corresponding author: Jianglin Xia

Received: February 2022

Revised: May 2022

Early access: July 20, 2022

Published online: July 20, 2022

This research was supported in part by the National Social Science Foundation of China (No.17BGL252).

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Abstract

Under the dual background of energy economy and environmental protection, expanding the optimal decision-making of the low-carbon supply chain is significant to the energy manufacturing industry. This paper discusses the impact of low-carbon preference, price elasticity, and low-carbon research and development investment (LR & DI) on equilibrium decisions of a three-echelon supply chain system under the scenarios of market segments and fairness concerns. Firstly, it is found that the optimal price and yield are positively correlated with the counterparty's demand elasticity coefficient and sensitivity coefficient, and the supply chain profit is better under the decentralized decision of the retailer's fairness concerns. Secondly, there is a positive correlation between each member's interests and the degree of the manufacturer's fairness concern. While considering the retailer, the manufacturer is responsible for the supply chain income loss. Finally, because the optimal pricing and yield are positively correlated with consumers' low-carbon preference and LR & DI, manufacturers may optimize profits by raising LR & DI within a tolerable range. In addition, it is verified that the Stackelberg game optimizes the traditional model by a numerical example, providing theoretical support for decision-making in different scenarios.

Keywords:

Mathematics Subject Classification: Primary: 91A35; Secondary: 90B06, 91B42.

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Figure 1. Low Carbon Supply Chain Structure of Market Segments

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Figure 2. The impact of the ratio of elasticity coefficient to sensitivity coefficient on the optimal price and yield

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Figure 3. The impact of the ratio of elasticity coefficient to sensitivity coefficient on the optimal wholesale price and the supply chain profit

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Figure 4. The impact of fairness concern coefficient on the optimal price, yield and profit

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Figure 5. The impact of low carbon preferences on the optimal price, yield

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Figure 6. The impact of low carbon preferences on the optimal wholesale price and the supply chain profit

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Figure 7. The impact of FC on the optimal carbon emission

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Figure 8. The impact of LS & DI on market demand

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Table 1. Comparisons of related literature

References	LSC	FC	Obj.F	Uncertainty	Method
Katok et al. (2014) [17]	-	M	D	PEC	BG
Zhou et al. (2016) [48]	LR & DI, LS	R	D	MP	SG
Ji et al. (2017) [15]	LR & DI, LS	-	D	PEC	SG
H. Li et al. (2017) [19]	LR & DI	M	C	-	SG
B. Du et al. (2017) [5]	LS	M, R	D	PEC	SG
Xia et al. (2018) [37]	LR & DI, LS	-	C, D	MP	DG
Han & Wang (2018) [14]	LR & DI, LS	-	C, D	PEC	SG
Yu et al. (2020) [43]	LR & DI, LS	-	C, D	PEC	DG
Ghosh et al. (2021) [8]	LS	-	-	-	FM
Midya et al. (2021) [23]	LS	-	D	MP	FM
Qian et al. (2020) [28]	LR & DI	M, R	C, D	PEC	SG
Paul et al. (2021) [26]	LS	-	D	MP	EOQ
Yao et al. (2021) [42]	LR & DI, LS	-	C, D	MP, PEC	DG
This work	LR & DI, LS	M, R	C, D	MP, PEC	SG

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Table 2. Basic notation definition

Notations	Definition
Sets
i	i={h, l}; i=h represents the highly dynamic market; i=l represents the low dynamic market
y	y={C, R, M}; y=C means the centralized decision-making; y=R means the decentralized decision of the retailer's fairness concern; y=M means the decentralized decision of the manufacturer's fairness concern
Parameters
$ \alpha $	Share of low carbon products in highly dynamic market
$ \beta $	Price elasticity coefficient of demand in consumer markets
$ \gamma $	Price sensitivity coefficient of counterparty in supply chains
$ \varepsilon _i $	Consumers' perception of carbon emissions per unit of low-carbon products in i market, where i=h, l
$ \lambda $	The retailer fairness concern coefficient
$ \eta $	The manufacturer fairness concern coefficient
$ \eta _i $	i=h represents the manufacturer's fairness concern when the retailer sell to highly dynamic market; i=l represents the manufacturer's fairness concern when the retailer sell to lowly dynamic market
C	The unit production cost of products
e	Low-carbon level of products produced by the manufacturer
k	LR & DI coefficient
$ \theta $	Share of LR & DI in highly dynamic market
I	LR & DI of low carbon products
Q	Total demand of consumer markets
Decision variables
$ \omega _y $	In the scenario of y, the wholesale price set by the manufacturer, where y=R, M
$ P _i $	The retailer's price to the i market, where i=h, l
$ P _{yi} $	In the scenario of y, the retailer's price to the i market, where i=C, R, M; i=h, l
$ q _i $	The manufacturer's output to the i market, where i=h, l
$ q _{yi} $	In the scenario of y, the manufacturer's output to the i market, where i=C, R, M; i=h, l
$ e _y $	In the scenario of y, the optimal low carbon level of products produced by manufacturers, where y=C, R, M
Functions
$ Pi _i^y $	In the scenario of y, the profit function of the retailer for i market, where i=R, M; i=h, l
$ Pi _M $	In decentralized decision-making, the manufacturer's profit function
$ Pi _R $	In decentralized decision-making, the retailer's profit function for the whole consumer market
$ U _i^y $	In the scenario of y, the utility of the retailer for i market, where i=R, M; i=h, l
$ U _M $	In decentralized decision-making, the manufacturer's utility function
$ U _R $	In decentralized decision-making, the retailer's utility function for the whole consumer market

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Table 3. Parameter Initial Value

Parameters	Q	e	$ \lambda $	$ \lambda ' $	$ \eta $	C	k	I	$ \alpha $	$ \beta $	$ \gamma $	$ \varepsilon _h $	$ \varepsilon _l $
Value	5	1	0.5	1/3	0.5	2	5	25	0.6	0.3	0.4	0.8	0.4

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Table 4. Results of LINGO and MATLAB optimal values

Model	Method	Parameters	$ P_h $	$ P_l $	$ q_h $	$ q_l $	$ \Pi $
Model C	L	$ \beta /\gamma $	10.333	9.167	2.812	2.059	32.794
		$ \varepsilon _i $	19.2	17.8	5.16	4.74	183.444
	M	$ \beta /\gamma $	11.25	8.274	3.333	2.867	34.93
		$ \varepsilon _i $	21.09	20.02	6.774	5.574	248.1
DR	L	$ \beta /\gamma $	11.541	8.112	2.898	2.532	36.441
		$ \lambda $	20.72	19.32	5.31	4.89	204.5
		$ \varepsilon _i $	22.69	21.32	5.417	4.983	244.498
	M	$ \beta /\gamma $	13.34	12.87	3.333	2.917	41.46
		$ \lambda $	20.743	19.333	5.315	4.894	204.778
		$ \varepsilon _i $	24.82	23.82	6.982	5.782	311
DM	L	$ \beta /\gamma $	16.2	14.8	3.4	3.067	52.763
		$ \eta $	16.49	15.09	4.89	4.47	148.1
		$ \varepsilon _i $	18.69	17.29	5.11	4.69	176.596
	M	$ \beta /\gamma $	16.54	15.48	3.464	3.081	57.28
		$ \eta $	18.6	17.4	5.06	4.7	155.9
		$ \varepsilon _i $	20.82	19.79	6.686	5.456	243.5

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Table 5. Results of LINGO and MATLAB optimal values

Model	Parameters	$ P_h $	$ P_l $	$ q_h $	$ q_l $	$ \Pi $
Model C	$ \beta /\gamma $	8.874%	10.793%	18.528%	39.242%	6.513%
	$ \varepsilon _i $	9.844%	12.472%	31.279%	17.595%	35.246%
DR	$ \beta /\gamma $	15.588%	58.654%	15.010%	15.205%	13.773%
	$ \lambda $	0.111%	0.067%	0.094%	0.082%	1.359%
	$ \varepsilon _i $	9.387%	11.726%	28.891%	16.035%	27.199%
DM	$ \beta /\gamma $	2.099%	4.595%	1.882%	0.465%	8.561%
	$ \eta $	12.796%	15.308%	3.476%	5.145%	5.267%
	$ \varepsilon _i $	11.396%	14.459%	30.841%	16.333%	37.885%

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