Low-carbon supply chain strategy and contract coordination considering manufacturers′ fairness concerns

The government′s carbon policies and consumers′ increasing environmental awareness have accelerated the transformation of the traditional supply chain into the low-carbon supply chain (LCSC). This study examines the impact of fairness concerns on low-carbon supply chain decisions and coordination. This study considers the manufacturer′s fairness concerns about its upstream suppliers, who are also carbon emitters, and uses game theory to investigate the low-carbon efforts (carbon emission reduction levels and low-carbon products promotion) and coordination mechanisms of a three-echelon LCSC under cap-and-trade regulation. Specifically, we examine the impact of the manufacturer′s fairness concerns, consumers′ low-carbon preferences and carbon trading prices on the low-carbon efforts, production quantity, and profits in the three-echelon LCSC. We find that the manufacturer′s fairness concerns about upstream carbon emitters will decrease all members′ enthusiasm for low-carbon efforts and lower the profits of the other members. Furthermore, we explore five decision models with different levels of joint-decision making to explore which coalitions might be most effective in the LCSC performs in terms of low-carbon efforts and profits. We conclude that the cooperation of carbon emitters is vital for low-carbon efforts and that the LCSC may be Pareto-improving under the two-way emission reduction cost sharing contract.