Pricing and Carbon Mitigation in a Dual-Channel Supply Chain: A Dynamic Game Approach

ABSTRACT

Considering the low-carbon preference of consumers, this paper establishes a dynamic decision-making model to study the dynamic pricing decisions and carbon emission reduction decisions of dual channel supply chain members, and discusses the impact of carbon emission reduction on prices and profits. It is found that the distributor’s and the producer’s carbon mitigation can have a positive or negative impact on the distribution price, the direct sales price and the wholesale price. When the competition between the distributor and the producer is not fierce, these three prices will increase with the increase of their carbon mitigation. When the producer’s carbon mitigation effort has a positive impact on the distribution channel demand, the distributor’s profit will increase with the increase of the producer’s carbon mitigation effort. On the other hand, when the producer’s carbon mitigation effort has a negative effect on the distribution channel demand, the distributor’s profit will decrease with the increase of the producer’s carbon mitigation effort. In addition, the distributor’s profit is more sensitive to the producer’s carbon emissions. When the producer and the distributor jointly reduce emissions, appropriate coordination strategies are needed to coordinate the supply chain.

KEYWORDS:

• Carbon emissions
• differential game
• dual-channel supply chain

JEL:

• C71
• Q56

Acknowledgment

We are grateful for helpful support and suggestions from Professor Chun-Ping Chang. We are responsible for any errors and omissions.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work is supported by National Social Science Foundation of China [No 22BYJ018], FRGS/1/2021/STG06/SYUC/03/1, Malaysia.