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Differential game theoretic analysis of the dynamic emission abatement in low-carbon supply chains

Author

Listed:
  • Longfei He

    (Tianjin University)

  • Baiyun Yuan

    (Henan Polytechnic University)

  • Junsong Bian

    (La Trobe University)

  • Kin Keung Lai

    (Shaanxi Normal University
    Hong Kong University)

Abstract

This paper studies the impact of bilateral participation strategy on the dynamic emission-reducing behaviors and associated performance of low-carbon supply chains using differential game models. We first consider a dyadic supply chain comprising one supplier and one manufacturer in the base model and derive the equilibrium solutions of dynamic emission abatement in decentralized and centralized systems, respectively. In the decentralized supply chain, we consider both unilateral sharing and bilateral participation contracts and examine the feedback equilibrium strategies and trajectories of emission abatement of all parties. By comparison, we find that the bilateral contract leads to lower emission abatement and higher profits of all players and the system than that under unilateral sharing contract. Meanwhile, we show that the properly-designed bilateral participation contract can coordinate the decentralized dyadic supply chain. By extending the base model, we further figure out the equilibria and optimal trajectories for the dynamic cooperative emission abatement and the associated mechanism design in a supply chain with two competing suppliers and one manufacturer. Interestingly, we find that the bilateral participation contract can also coordinate the competing channels with competitive or complementary components at the upstream level. We uncover that the bilateral participation contract is effective in coordinating supply chains with dynamic cooperative emission abatement since it can overcome the disadvantage of uneven distribution of emission-reducing capability endowments among chain members. Finally, we also conduct computational and sensitivity analyses to illustrate the previous results. These findings provide potential implications for firms’ dynamic cooperation in emission abatement.

Suggested Citation

  • Longfei He & Baiyun Yuan & Junsong Bian & Kin Keung Lai, 2023. "Differential game theoretic analysis of the dynamic emission abatement in low-carbon supply chains," Annals of Operations Research, Springer, vol. 324(1), pages 355-393, May.
    • Handle: RePEc:spr:annopr:v:324:y:2023:i:1:d:10.1007_s10479-021-04134-9
    DOI: 10.1007/s10479-021-04134-9
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