Optimal Decision-making for Green Supply Chain Based on Overconfidence under the Carbon Emission Constraint

Abstract

In light of the combination of overconfident manufacturer – rational retailer – green-preferring consumers, this paper establishes a Stackelberg game model under the carbon emission constraint, obtains the optimal green and emission reduction strategy and optimal pricing strategy in case of decentralized decision-making using the backward induction method, and further analyzes the impacts of the manufacturers’ overconfidence and the consumers’ green preference on the optimal decision and profit of the supply chain. According to the results of the study, under certain conditions, the low-carbon supply chain will no longer be “low-carbon” and the carbon tax policy will be ineffective; over-confident manufacturers will reduce the investment in carbon emission reduction while increasing the wholesale price of unit products; rational retailers may expand the market demands for products at the expense of some of its profit margins; the profits of the supply chain system and its members are all negatively correlated with the manufacturer’s overconfidence level, but positively correlated with the consumers’ green preference level. Finally, the model is proved to be effective through example analysis, showing that it can provide some reference for relevant supply chain enterprises when they are making decisions on emission reduction investment.