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Optimizing Sustainable Supply Chains: An Analysis of Quantity-Discount Pricing Strategies Under Carbon Cap-and-Trade Regulations

Author

Listed:
  • Xi-Bin Lin

    (Department of Distribution Management, Takming University of Science and Technology, Taipei 114, Taiwan
    Department of Marketing and Logistics Management, Chihlee University of Technology, Banqiao 220305, Taiwan)

  • Jonas Chao-Pen Yu

    (Department of Distribution Management, Takming University of Science and Technology, Taipei 114, Taiwan)

  • Kung-Jeng Wang

    (Department of Industrial Management, National Taiwan University of Science and Technology, Taipei 106, Taiwan
    Artificial Intelligence for Operations Management Research Center, National Taiwan University of Science and Technology, Taipei 108, Taiwan)

  • Hui-Ming Wee

    (Department of Industrial and Systems Engineering, Chung Yuan Christian University, Zhongli District, Taoyuan City 32022, Taiwan)

Abstract

This study investigates two pricing strategies within a vendor-buyer supply chain system under cap-and-trade regulation, emphasizing demand sensitivity to market price and green technology investment. The findings reveal that quantity discounts significantly enhance profitability across the supply chain by encouraging buyers to place larger orders, thereby benefiting vendors, buyers, and end consumers. A novel profit-sharing parameter is introduced to foster sustainable and mutually beneficial relationships between supply chain participants. A search algorithm is developed to determine the optimal solutions by using the profit-sharing mechanisms. The analysis yields three key insights: first, a critical cap threshold is identified, enabling supply chain participants to make informed strategic decisions based on the value of the cap; second, another critical cap threshold is derived to assist governments in setting feasible emission limits that incentivize vendors to invest in green technology—caps below this threshold may discourage such investments; third, a reasonable return on investment (ROI) benchmark is established to guide vendors in adopting effective green technology strategies. Numerical examples and sensitivity analyses are conducted to illustrate the theoretical framework and validate the findings.

Suggested Citation

  • Xi-Bin Lin & Jonas Chao-Pen Yu & Kung-Jeng Wang & Hui-Ming Wee, 2025. "Optimizing Sustainable Supply Chains: An Analysis of Quantity-Discount Pricing Strategies Under Carbon Cap-and-Trade Regulations," Mathematics, MDPI, vol. 13(11), pages 1-17, May.
    • Handle: RePEc:gam:jmathe:v:13:y:2025:i:11:p:1761-:d:1664612
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    References listed on IDEAS

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    1. Hua, Guowei & Cheng, T.C.E. & Wang, Shouyang, 2011. "Managing carbon footprints in inventory management," International Journal of Production Economics, Elsevier, vol. 132(2), pages 178-185, August.
    2. Yosef Daryanto & Hui Ming Wee & Gede Agus Widyadana, 2019. "Low Carbon Supply Chain Coordination for Imperfect Quality Deteriorating Items," Mathematics, MDPI, vol. 7(3), pages 1-24, March.
    3. Jafar Heydari & Kannan Govindan & Zahra Basiri, 2021. "Balancing price and green quality in presence of consumer environmental awareness: a green supply chain coordination approach," International Journal of Production Research, Taylor & Francis Journals, vol. 59(7), pages 1957-1975, April.
    4. M. A. Hoque, 2021. "An optimal solution policy to an integrated manufacturer-retailers problem with normal distribution of lead times of delivering equal and unequal-sized batches," OPSEARCH, Springer;Operational Research Society of India, vol. 58(2), pages 483-512, June.
    5. Chen, Wenbo, 2018. "Retailer-driven carbon emission abatement with consumer environmental awareness and carbon tax: Revenue-sharing versus Cost-sharingAuthor-Name: Yang, Huixiao," Omega, Elsevier, vol. 78(C), pages 179-191.
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