Coordinating a Two-Echelon Supply Chain under Carbon Tax

• Main Authors: Wei Yu, Ruizhu Han
• Format: Article
• Language: English
• Published: MDPI AG 2017-12-01
• Series: Sustainability
• Subjects: carbon tax; modified wholesale price contract; modified cost-sharing contract; two-part tariff contract; channel coordination
• Online Access: https://www.mdpi.com/2071-1050/9/12/2360

In this paper, we study the impact of carbon tax on carbon emission and retail price in a two-echelon supply chain consisting of a manufacturer and a retailer. Specifically, by adopting two types of contracts, i.e., the modified wholesale price (MW) and the modified cost-sharing contract (MS), supply chain coordination is achieved, which promotes the supply chain efficiency. Our study shows that: (1) with the increase of carbon tax, both the optimal emission reduction level and the optimal retail price increase, and then keep unchanged; (2) neither MW nor MS benefits the manufacturer after the supply chain coordination; and (3) to effectively coordinate the supply chain, we propose an innovative supply chain contract that integrates the firms’ optimal decisions under MW or MS with a two part tariff contract (TPT) and a fixed fee the retailer can pay to ensure a win–win solution.