Coordination Decisions for a Low-Carbon Supply Chain Considering Risk Aversion under Carbon Quota Policy

Abstract

To mitigate climate change, the governments of various countries have formulated and implemented corresponding low-carbon emission reduction policies. Meanwhile, consumers' awareness of the necessity of environmental protection is gradually improving, and more consumers pay attention to the environmental attributes of products, which all encourages enterprises to have great power to implement low carbon technology. As rational decision makers, members tend to show the characteristics of risk aversion. How to meet the needs of consumers and reduce their own risks has become a key point of low-carbon supply chain management. Considering carbon quota policy, in this paper, the optimal pricing decision-making process of a supply chain system is discussed under risk-neutral and risk-avoidance decision-making scenarios by game theory, and a cost-sharing contract is used to coordinate the decision-making process of a supply chain system. By analyzing the influence of the risk aversion coefficient on the optimal strategies of participants, we find that when the manufacturer has the risk aversion characteristic, the risk aversion coefficient will further reduce the carbon emission rate, the wholesale price of the product and the manufacturer's profit but increase the product order quantity and the retailer's profit. In addition, if consumers have a high preference for low-carbon products, the manufacturer's risk-aversion coefficient will lead to a lower selling price than in the centralized decision-making situation, and the profit of the supply chain system will also be further reduced. When the cost-sharing contract is adopted for coordination, the Pareto improvement of supply chain members' profits can be achieved when the parameters of the cost-sharing contract are appropriate, regardless of the manufacturer's risk-neutral decision or risk-aversion decision.