The effect of revenue sharing and bargaining power on carbon emission reduction in a supply chain

YANG Huixiao, OU Jinwen

Systems Engineering - Theory & Practice ›› 2020, Vol. 40 ›› Issue (9) : 2379-2390.

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中国科学院数学与系统科学研究院期刊网
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Systems Engineering - Theory & Practice ›› 2020, Vol. 40 ›› Issue (9) : 2379-2390. DOI: 10.12011/1000-6788-2019-1323-12

The effect of revenue sharing and bargaining power on carbon emission reduction in a supply chain

  • YANG Huixiao, OU Jinwen
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Abstract

Based on the background where carbon taxes arise and customers are willing to pay more for low-carbon products, we study a supply chain with a manufacturer (she) and a retailer (he) and explore the effect of revenue sharing and bargaining power on the manufacturer's carbon emission abatement efforts and the two firms' profits, where the firms can negotiate over the revenue share through the bilateral bargaining game. Our analytical results show that, with an exogenous revenue share, revenue sharing can enhance the manufacturer's incentive to abate carbon emission and her profit, and the manufacturer would like to seize all the sale revenue while the retail will take a moderate proportion when the revenue share can be determined by either firm. However, under the bilateral bargaining game, the manufacturer's deserved revenue share without abatement is equal to her bargaining power, but her share with abatement is greater than her bargaining power. In particular, even when the retailer holds all the bargaining power, he will still share his revenue with the manufacturer, which can improve both firms' profits; yet, when the manufacturer possesses all the bargaining power, she will grab all the sales revenue. Moreover, when compared with the case without revenue sharing, the manufacturer will always benefit from negotiating a revenue-sharing ratio, whereas the retailer can benefit from this only when the manufacturer enjoys limited bargaining power. Specifically, if the retailer has full bargaining power, he will still share the profits with the manufacturer, which is mutually beneficial; If the manufacturer has all the negotiating power, she will own all the sales. And the manufacturer will always benefit from negotiating a revenue-sharing ratio, compared with non-sharing, whereas the retailer will benefit only if the manufacturer has less negotiating power. What's more, either consumers' environmental awareness or the government's carbon taxes can stimulate the manufacturer to invest in carbon emission abatement, and both firms always benefit from this investment. Furthermore, the government can set an appropriate carbon tax to induce the manufacturer to choose an abatement rate as large as possible. Finally, revenue sharing contract can perfectly coordinate the supply chain only when the manufacturer possesses all the bargaining power.

Key words

carbon tax / consumer environmental awareness / carbon emission abatement / revenue sharing contracts / bargaining game

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YANG Huixiao , OU Jinwen. The effect of revenue sharing and bargaining power on carbon emission reduction in a supply chain. Systems Engineering - Theory & Practice, 2020, 40(9): 2379-2390 https://doi.org/10.12011/1000-6788-2019-1323-12

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Funding

National Natural Science Foundation of China (71802096); Guangdong Basic and Applied Basic Research Foundation (2020A1515011118); Humanity and Social Science Youth Foundation of Ministry of Education of China (18YJC630223); China Postdoctoral Science Foundation (2018M633292)
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