Outsourcing or self-run? Production decision of manufacturer

Abstract

In China's dual-carbon strategy, manufacturers face increasingly stringent carbon emission constraints, necessitating a balance between cost efficiency and environmental performance in production decisions. As a core regulatory instrument, carbon pricing significantly influences outsourcing strategies and emission reduction behaviors. This study investigates manufacturers' outsourcing decisions under a carbon cap-and-trade scheme, focusing on how supplier substitutability affects production mode selection. An analytical framework is developed based on varying market structures, incorporating game-theoretic modeling and numerical simulation to evaluate the joint impact of carbon policies and supply chain configurations. The results reveal that: (1) Supplier substitutability substantially alters the manufacturer's optimal outsourcing strategy, prompting cautious evaluation of potential outsourcing partners under competitive threats; (2) Different outsourcing structures lead to heterogeneous outcomes in profitability and emission performance under carbon quota constraints; (3) Consumer acceptance of supplier products further shapes the manufacturer's outsourcing preferences and environmental outcomes. This research contributes to the theoretical advancement of green supply chain management and offers practical implications for policy-makers and manufacturers seeking sustainable and efficient production strategies.