Game-Theoretic Analysis of Pricing and Quality Decisions in Remanufacturing Supply Chain: Impacts of Government Subsidies and Emission Reduction Investments under Cap-and-Trade Regulation

To analyze the effects of remanufacturing subsidies and emission reduction investments on pricing and quality decisions under cap-and-trade regulation, four profit-maximization Stackelberg game models for a remanufacturing supply chain (RSC), i.e., without remanufacturing subsidies and emission reduction investments, with remanufacturing subsidies only, with emission reduction investments only, and with both remanufacturing subsidies and emission reduction investments, are constructed, derived, compared, and analyzed. Results show that government subsidies and emission reduction investments can improve profits for the RSC members, while possibly leading to more total carbon emissions. Furthermore, it is worth noting that profit growth and emission reduction can be achieved even though reducing remanufacturing subsidies in some scenarios. Moreover, increasing emission reduction targets will reduce profits of the RSC members but does not necessarily contribute to emission reduction. Therefore, to help the RSC improve profits and reduce emission, the policymaker should formulate differentiated policies based on the types of manufacturers. For the non-abating manufacturer, the government should set higher emission reduction targets and cut down subsidies; for the low-efficiency abating manufacturer, higher emission reduction targets and subsidies are more suitable. However, for the high-efficiency abating manufacturer, lower emission reduction targets and subsidies are more effective.