Research on channel selection of low-carbon product considering advertising promotion under substitute competition

With the pressure to cut carbon emissions and the new opportunities of the low-carbon market, manufacturers are starting to shift from regular product to low-carbon product. So, the issues arise on the distribution channel selection of low-carbon products by manufacturer under coexist and substitute competition between the regular products and low-carbon products. In this paper, we established game models to describe the decision behavior of manufacturer and retailer in the regular channel and a dedicated channel. Comparative analyses found under traditional wholesale price contracts, the dedicated retailer’s advertising benefits both the regular channel retailer and itself when the cost coefficient of advertising falls within a certain range of values, but it is disadvantageous to itself and beneficial to the regular channel retailer in another value range. Furthermore, the results show when the cost coefficient of advertising is less than a certain threshold, the optimal strategy for manufacturer is to choose the regular channel; Otherwise, it depends on the cost coefficient of low-carbon level and consumer sensitivity. If the cost coefficient is below a certain threshold, the optimal strategy is to choose the regular channel; otherwise, choose a dedicated channel. Similarly, consumer sensitivity is more than a certain threshold; choose the regular channel; otherwise, choose a dedicated channel. We identified the threshold points. Numerical analysis reveals that if the manufacturer cannot exactly estimate the cost coefficient of low-carbon level, a dedicated channel may mean less to lose when the low-carbon products first hit the market, and as the market matures, it becomes particularly important to estimate consumer sensitivity to low-carbon level.