Pricing Decisions in a Supply Chain Consisting of One Manufacturer and Two Retailers under a Carbon Tax Policy

Abstract

Global warming has become an issue of increasing worldwide concern. At present, the most direct way to solve this problem is to control carbon emissions. In our paper, carbon tax policy is injected into a two-stage supply chain consisting of one manufacturer and two retailers. We establish six game models according to the relationship (competitive or cooperative) between the retailers and three power structures (manufacturer Stackelberg (MS), retailer Stackelberg (RS), and vertical Nash (VN)) between the two retailers and the manufacturer. We then adopt the inverse induction method to derive optimal pricing decisions for each model. Optimal profits for supply chain members are obtained. Finally, we analyse: i) the effects of competition and cooperation between the two retailers on equilibrium results; ii) the effects of the three possible power structures existing between the manufacturer and the two retailers on equilibrium results; and especially iii) the effect of the carbon tax rate on pricing decision and the profits of the supply chain. We find that the different power structure and the horizontal relationship between the two retailers have important influence on equilibrium results. Further, the change of carbon tax rate have different influence on pricing under the different power structure and the horizontal relationship between the two retailers. When the government adjusts the carbon tax rate, it should fully consider the different power structure and the horizontal relationship for two-stage supply chain consisting of one manufacturer and two retailers. Although the implementation of the carbon tax policy reduces the corporate profits, it reduces the total carbon emission. The carbon tax policy is helpful to build an environment-friendly and resource-conserving society.