The impact of peer-induced fairness concerns on competitive manufacturers’ optimal decisions under C&T regulation

As major economies around the world have proposed their carbon neutrality targets in recent years, governments and companies have gradually increased their focus on decarbonization. Cap-and-trade (C&T) regulation is widely regarded as an effective mechanism for reducing carbon emissions. This paper considers a supply chain consisting of two competitive manufacturers and one fairness-neutral retailer, where one manufacturer is fairness-neutral and has invested in Carbon Emission Reduction (CER) technology, the other manufacturer is concerned with peer-induced fairness, and then explores the pricing and carbon emission reduction decisions of a two-tier supply chain under C&T regulation. Two models are constructed under different fairness attitudes, and the equilibrium results are derived to analyze the joint role of peer-induced fairness concerns and the policy. Results indicate that the manufacturer’s peer-induced fairness concerns increase her profit and those of the retailer, reduce the optimal emission reduction and profit of her rival, and also increase the total carbon emissions of the supply chain, which is detrimental to the environment. In addition, the carbon emission reduction level can be affected by the cost coefficient of CER and carbon quotas.