The Impact of Power Structures on Supply Chain Enterprises with Carbon Emission Reduction Decisions

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1 Intenational Jounal of Business an Manageent; Vol., No. 8; 08 ISSN E-ISSN 8-89 Publishe by Canaian Cente of Science an Eucation The Ipact of Powe Stuctues on Supply Chain Entepises with Cabon Eission Reuction Decisions Fan Danan & Xu Qi Gloious Sun School of Business an Manageent, Donghua Univesity, Shanghai, China Coesponence: Fan Danan, Gloious Sun School of Business an Manageent, Donghua Univesity, Shanghai, China. E-ail: Receive: Mach, 08 Accepte: June 6, 08 Online Publishe: June 0, 08 oi:0.559/ijb.vn8p46 URL: Abstact This pape focuses on analyzing the ipact of powe stuctues of supply chain entepises on thei cabon eission euction ecisions. Fist, thee gae oels (Nash, Manufactue Stackelbeg an Retaile Stackelbeg ae constucte accoing to ebes iffeent bagaining powe, espectively. Then, the optial cabon eission euction ecisions an pofits of supply chain entepises in iffeent gae oels ae solve an copae. The eseach esults show that supply chain entepises have the lowest cabon eission euction ate in Nash gae, an thei coesponing pofits ae the least. As fo Stackelbeg gae, the cabon eission euction ate as a leae is geate than that as a followe, but the pofit as a leae is less than that as a followe. The total pofit of the entie supply chain syste in Manufactue Stackelbeg oel is always geate than that in Retaile Stackelbeg oel. Keywos: supply chain, powe stuctues, cabon eission euction, gae theoy. Intouction In the ea of inceasing global waing, eucing cabon ioxie eission has becoe a consensus of intenational counities. Accoing to the Pais Ageeent eache in 05, all paties woul paticipate in the global esponse to cliate change in an inepenent contibution appoach. The evelope counties will continue to take the lea in eucing eissions an stengthen financial, technological an capacity-builing suppot fo the eveloping counties to help the itigate an aapt to cliate change. In this context, eseach on supply chain cabon euction ecisions has geat pactical significance. Thee is a atue liteatue stea about low-cabon supply chains which coves cabon anageent in low-cabon supply chains, the ipact of policies (e.g., cabon tax, cabon taing, an cabon subsiy on the pefoance of low-cabon supply chains. Thee ae also soe papes concening low-cabon supply chain esign. Fo exaple, Hua et al. (0 investigate how fis anage cabon footpints in inventoy anageent une the cabon eission taing echanis. Hsu et al. (0 utilize the Decision-aking Tial an Evaluation Laboatoy appoach to ealize cabon anageent in geen supply chains which coul ipove the oveall pefoance of supplies. Zakei et al. (05 copae the supply chain pefoance une cabon tax an cabon eissions taing policy schees via an analytical supply chain planning oel. Yu an Han (07 stuie the ipact of cabon tax on cabon eission an etail pice in a two-echelon supply chain. Yi an Li (08 stuie effects of govenent subsiies an cabon tax on the ecisions of supply chain ebes an foun that govenent shoul levy cabon taxes against anufactues accoing to thei pollution levels. Chaabane et al. (0 pesente a copehensive ethoology to aess sustainable supply chain esign pobles whee cabon eissions an total logistics costs, etc. wee consiee in the esign phase, an the esults showe how eission taing aket can be use to euce the cabon ioxie abateent cost. Elhehli an Meick (0 consiee a supply chain netwok esign poble that takes CO eissions into account, an the test esults inicate that consieing eission costs coul change the optial configuation of the supply chain. Zhao et al. (0 use evolutionay gae theoy to analyze the stategies selecte by anufactues to euce cabon eissions. In ecent yeas, an inceasing nube of stuies focus on cabon eission euction ecisions fo low-cabon supply chains fo iffeent pespectives. He et al. (05 stuie an eission-epenent yaic fashion supply chain consisting of a supplie an a anufactue, by exploiting Stackelbeg gaes in fou oels epening on 46

2 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 channel stuctue, copaing thei eission euction efficiencies an pofitability fo each pai of settings. Du et al. (05 aopte a novel eission-sensitive ean function, intouce an eission-sensitive cost function, an then investigate the iffeent eission euction stategies of each ebe in centalize an ecentalize supply chains. Wang et al. (06 focuse on a yaic supply chain with a anufactue an a etaile, evelope a gae oel to stuy the cabon eission euction ecision of the anufactue within the etaile-oinant case an the powe-balance case, espectively. Ji et al. (07 focuse on the eission euction behavios of the chain ebes in both the etail-channel an ual-channel cases using the Stackelbeg gae oel. Although the above stuies also exploe the cabon eission euction ecision, note that Wang et al. (06 focuses on the ecision of the anufactue an o not take into consieation the ecisions of all ebes of supply chain, as we o in this pape. Moeove, copae with ou eseach, He et al. (05, Du et al. (05, an Ji et al. (07 oes not analyze the ipact of the bagaining powe of the anufactue an the etaile on thei ecisions. Specifically, base on the powe stuctues of supply chain entepises, this pape constucts thee gae oels: Nash, Manufactue Stackelbeg an Retaile Stackelbeg. The optial cabon eission euction ecisions of supply chain entepises in iffeent gae oels ae iscusse an copae in oe to guie the pactice of iffeent types of entepises.. Moel Desciption an Assuptions Consie a two-tie supply chain syste consisting of one anufactue an one etaile. The anufactue eits cabon in the pocess of poucing aw ateials, while the etaile oes that in the istibution pocess (tanspotation an sales. Supply chain entepises can euce cabon eissions though investent on cabon abateent technology. The geate the cabon abateent investent, the bette the cabon eission euction effects. Howeve, oe investent woul ipai pofits of supply chain entepises, so these entepises ight euce thei effots in cabon eission euction. Theefoe, it is vey ipotant fo entepises to ake the optial cabon euction ecisions. Powe stuctues of supply chain entepises vay. When they ae evenly atche, the gae between the anufactue an the etaile is a Nash gae. When one of the is a leae an the othe is a followe, the gae between the two paties is a Stackelbeg gae. Diffeent gae behavios ae boun to affect the cabon eission euction ecisions of supply chain entepises. Theefoe, this pape ainly iscusses the ipact of the iffeent gae oels on the optial cabon eission euction ecisions of supply chain entepises: Nash (N: In this scenaio, the anufactue an the etaile ove siultaneously when eciing on thei own cabon eission euction ate. Manufactue Stackelbeg (M: In this scenaio, the anufactue, as the Stackelbeg leae, oves fist to set its cabon eission euction ate. The etaile, as the followe, ecies its cabon eission euction ate base on the anufactue s ecision. Retaile Stackelbeg (R: In this scenaio, the etaile, as the Stackelbeg leae, oves fist to set its cabon eission euction ate. The anufactue, as the followe, chooses its cabon eission euction ate base on the leae s ecision. The paaetes an ecision vaiables involve in this pape ae shown in Table. Table. Paaetes an ecision vaiables Paaetes Paaete Definitions Wholesales pice of pe unit pouct of the anufactue w p Sales pice of pe unit pouct of the etaile c Pouction cost of pe unit pouct of the anufactue π, π, π Pofits of the anufactue, the etaile an the supply chain syste, espectively c, c Cabon abateent costs of the anufactue an the etaile, espectively γ, γ Coefficient of cabon abateent costs of the anufactue an the etaile, espectively D Fixe ean of the aket Δ D Non-fixe ean bought by costues low-cabon pefeences δ Coefficient of ean incease bought by low-cabon pefeence of custoes Ipact facto of cabon eission euction ate of the anufactue on ean Ipact facto of cabon eission euction ate of the etaile on ean Decision Vaiables Decision Vaiable Definitions θ, θ Cabon eission euction ate of the anufactue an the etaile, espectively 47

3 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 Accoing to the eseach fo Wang et al. (06 an Ji et al. (07, thee is a quaatic elationship between C an θ, as well as C an θ : C = γ θ, C = γ θ ' ' ' ' ' ' whee θ = θ 00, θ = θ 00, θ an θ ae the atios an satisfy 0 < θ, θ < ; γ an γ epesent the extent of the ifficulty of cabon eission euction. Fo the pupose of siplification, we assue γ = γ = γ > 0. The above quaatic function inicates that the cabon abateent cost inceases quaatically with the cabon eission euction ate. The lage θ an θ, the bette the cabon eission euction effect, coesponingly, the highe C an C. We suppose that consues have a low-cabon pefeence, so the ean fo poucts consists of two pats: the oiginal fixe ean D an the change ean Δ D. Δ D is influence by θ an θ. To siplify the calculation, we assue D = 0. Accoing to Li et al. (04, the ean function fo low cabon poucts is as followe: Δ D = δθθ whee δ, an ae geate than zeo. It is geneally believe that + < which will ensue the iseconoies of scale, that is, continuously inceasing cabon eission euction ate oes not guaantee continuously inceasing ean of low-cabon poucts. On the basis of the analysis above, we can establish the pofit functions fo the anufactue, the etaile an the entie supply chain syste: The evenue of the anufactue is wholesales incoe wd ( +Δ D. The costs of the anufactue consist of pouction cost cd ( +Δ D ( w> c an cabon abateent cost C. Theefoe, the pofit function of the anufactue can be inuce as follows. = ( w c( D+ΔD C = ( wc δθθ γθ ( The evenue of the etaile is sales incoe pd ( +Δ D. The costs of the etaile inclue pocueent cost of poucts wd ( +Δ D ( p > w an cabon abateent cost C. Thus, the etaile's pofit function is as follows. = ( p w( D+ΔD C = ( pw δθθ γθ ( The total pofit of the entie supply chain syste is equal to the su of the pofits of the anufactue an the etaile, that is, = + = δθθ ( pc γ ( θ + θ (. Moel Constuction an Solution. Nash Gae Moel (N oel In N oel, the anufactue an the etaile alost have the sae bagaining powe, so they siultaneously ake ecisions on the optial cabon eission euction to axiize thei own pofits. This question can be escibe as follows. ax = ( wc δθ θ γθ θ ax = ( pw δθ θ γθ θ The fist eivatives of an on θ an θ, espectively, ae given by = ( w c δθ θ γθ =0 θ (4 = ( p w δθ θ γθ = 0 (5 θ Then the secon eivatives ae as follows, espectively. 48

4 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 = ( ( w c δθ θ γ < 0 θ ( ( = p w δθ θ γ < 0 θ whee + <. Theefoe, an ae both stictly concave functions, which iplies that θ an θ ae unique to axiize the pofits of the anufactue an the etaile, espectively. Cobining eqs (4 an (5, we can obtain the optial solutions θ an θ. ( wc δθ θ γθ = 0 ( pw δθ θ γθ = 0 δ θ ( ( = ( p w ( w c γ δ θ ( ( = ( p w ( w c γ Thus, the optial pofits of the anufactue an the etaile ae as follows, espectively. + δ ( p w [ ( w c] = γ + = δ [ ( pw] ( wc γ Substituting into equation (, we can obtain the optial pofit of the supply chain syste. + δ ( p w [ ( w c] = ( w c + ( pw γ. Manufactue Stackelbeg Gae Moel (M oel In M oel, the anufactue is the leae, an the etaile is the followe, which suggests that the bagaining powe of the anufactue is stonge than that of the etaile. In any inusties, Monopolistic anufactues, such as Dell, Sony, an Lenovo, possess oe bagaining powe than soe of thei etailes. Thus, the anufactue fist eteines its optial cabon eission euction ate an then the etaile akes its optial ecision, in oe to axiize thei espective pofits. This is a case of backwa inuction whee the anufactue's eission euction ate is fist given an then the etaile akes ecision. ax = ( pw δθθ γθ θ The fist eivative of on θ is given by = ( p w δθθ γθ = 0 (6 θ Then the secon eivative is as follows. ( ( = p w δθθ γ < 0 θ The pofit function of the etaile is a stictly concave function, so thee is a unique optial cabon eission euction atio of the etaile θ axiizing its pofit. Solving eq (6, we can obtain θ. 49

5 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 δ ( p w = θ θ γ Substituting eq (7 into eq (, we can obtain the pofit function of the anufactue. (7 The fist eivative of on θ is as follows. ( w c δ ( p w θ γθ = γ Then the secon eivative is obtaine. = ( wc δ ( pw θ γθ = 0 θ γ (8 w c p w θ γ = ( δ ( θ γ < 0 The pofit function of the anufactue is a stictly concave function, so thee is a unique θ to axiize. Solving eq (8, we can obtain the optial cabon eission euction ate of the anufactue. ( δ ( ( ( p w = [ ( wc ] θ γ By substituting eq (9 into eq (7, we can obtain the optial cabon eission euction ate of the etaile. ( δ ( ( = ( ( θ p w w c γ Then the optial pofits of the anufactue an the etaile ae as follows. (9 (0 + δ ( p w [ ( w c ] = γ + δ ( [ ( ] = pw wc γ The optial total pofit of the supply chain syste is: + = δ ( pw ( wc ( w c + ( pw γ. Retaile Stackelbeg Gae Moel (R oel In R oel, the etaile is the leae, an the anufactue is the followe, suggesting that the bagaining powe of the etaile is stonge than that of the anufactue, which is opposite with M oel. Many lage etailes, such as Wal-Mat an Aazon, have stonge bagaining powe than soe of thei upstea entepises. Thus, the etaile fist eteines its optial cabon eission euction ate an then the anufactue akes its optial ecision, in oe to axiize thei espective pofits. This is also a case of backwa inuction whee the etaile's eission euction ate is fist given an then the anufactue akes ecision. The fist eivative of ax = ( wc δθ θ γθ θ on θ is given by 50

6 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 Then the secon eivative is as follows. = ( w c δθ θ γθ = 0 θ ( = ( ( w c δθ θ γ < 0 θ is a stictly concave function, so thee is a unique θ axiizing. Solving eq (, we can obtain θ. δ ( w c = θ θ γ Substituting eq ( into eq (, we can obtain the pofit function of the etaile. ( The fist eivative of on θ is as follows. ( p w δ ( w c θ γθ = γ Then the secon eivative is obtaine. ( p w [ ( w c ] = δ θ γθ θ γ ( p w [ w c ] θ γ = ( δ ( θ γ < 0 is a stictly concave function, so thee is a unique θ axiizing. Solving eq (, we can obtain θ. ( δ θ = γ pw wc Substituting eq (4 into eq (, we can obtain θ. ( ( ( [ ( ] [ ( ] δ θ = pw wc γ Then the optial pofits of the anufactue an the etaile ae: ( ( [ ( ] [ ( ] (4 (5 + = δ pw wc γ + [ ( ] [ ( ] = δ pw wc γ The optial total pofit of the supply chain syste is as follows. + [ ( ] [ ( ] = δ [ ( pw ] [ ( wc ] ( w c + ( pw γ 4. Copaative Analysis of Solutions between Diffeent Gae Moels The optial cabon eission euction ecisions an optial pofits of the anufactue an the etaile in 5

7 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 iffeent gae oels ae obtaine an shown in Table. It is ifficult to iectly copae the optial ecisions an pofits of supply chain entepises in iffeent gae oels. We use nueical siulations to analyze. Assue that initial values of the paaetes ae as follows: p = 7, w = 0, c = 5, = 0.5, = 0., δ = 0, γ = 5. Accoing to Table, it is not ifficult to fin that an ae the eteinants of the iffeences in the optial ecisions an pofits aong iffeent gae oels. Theefoe, the iffeences of the cabon eission euction ecisions an pofits of thee gae oels ae analyze une the change of an, espectively. Table. The optial solutions in thee gae oels The optial solutions δ ( p w ( w c γ ( ( N Moel θ = [ ] [ ] θ ( δ ( p w w c M Moel θ = [ ( ] ( [ ( ] γ ( δ p w w c γ ( ( R Moel θ = [ ( ] [ ( ] δ ( p w ( w c γ ( ( N Moel θ = [ ] [ ] θ ( δ ( p w w c M Moel θ = [ ( ] ( ( γ ( δ p w w c γ ( ( R Moel θ = [ ( ] [ ( ] + δ ( p w [ ( w c] N Moel = γ + p w w c M Moel = δ [ ( ] [ ( ] γ + p w w c γ R Moel = δ [ ( ] [ ( ] + p w w c γ N Moel = δ [ ( ] [ ( ] + p w w c M Moel = δ [ ( ] [ ( ] γ 5

8 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 + p w w c γ R Moel = δ [ ( ] [ ( ] N Moel + δ ( p w [ ( w c] = γ ( w c + ( pw M Moel + δ ( p w [ ( w c ] = γ ( w c + ( pw R Moel + = δ γ ( w c + ( pw [ ( p w ] [ ( w c ] 4. Influence of Due to 0 < + <, let be taken fo , with a step size of 0.. Une the fluctuation of, the ipact status of iffeent gae oels on the optial ecisions of supply chain entepises is shown in Figue -. Figue - illustates that with the incease of, the iffeences in the cabon eission euction ates an pofits of supply chain entepises between iffeent gae oels ae all inceasing. An fo cabon eission euction ates, except fo θ θ < 0, the othes ae all geate than 0; fo pofits, except fo < 0 an <, the othes ae all geate than Figue. Diffeences in cabon eission euction ates of iffeent gae oels une fluctuations 5

9 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 Figue. Diffeences in pofits of iffeent gae oels une fluctuations 4. Influence of Due to 0 < + <, we suppose = an pe step size is 0.. As inceases, the ipact status of iffeent gae oels on the optial ecisions of supply chain entepises is shown in the following figues, an the conclusion is consistent with the case of. Figue. Diffeences in cabon eission euction ates of iffeent gae oels une fluctuations Figue 4. Diffeences in pofits of iffeent gae oels une fluctuations 5. Results Discussion Accoing to the above siulation analysis, we can easily each the following conclusions: 54

10 ijb.ccsenet.og Intenational Jounal of Business an Manageent Vol., No. 8; 08 Poposition θ < θ < θ; θ < θ < θ. Poposition inicates that the optial cabon eission euction ates of the anufactue an the etaile in N oel ae always less than that in M an R oels, while the optial cabon eission euction ate of the anufactue as a leae in M oel is geate than that of the anufactue as a followe in N oel, an the etaile's optial cabon eission euction ate is the opposite, which iplies that copae with Nash gae, the optial cabon eission euction ate of supply chain entepises in Stackelbeg gae is geate, an the effect is bette; in the two Stackelbeg gaes, the optial cabon eission euction ate as a leae is geate than that as a followe. Poposition < < ; < < ; < <. Poposition inicates that the optial pofit of the anufactue in N oel is always less than that in M an R oels, an it is the sae with the etaile, an the entie supply chain syste. The optial pofit of the anufactue as a leae in M oel is less than that of the anufactue as a followe in N oel an the etaile's optial pofit is the opposite. The total pofit of the entie supply chain syste in M oel is geate than that in R oel. Accoing to Poposition, although the optial cabon eission euction ate of Nash gae is sall an its cost is low, because of the less ean it bings, its pofit is always less than that in Stackelbeg gae. In the two Stackelbeg gaes, as fo the leae, although its ean inceases, such avantage is not sufficient to ake up fo the cost of cabon eission euction, which leas to its pofit less than that as a followe. 6. Conclusions Consieing the iffeences in powe stuctues between supply chain entepises, this pape constucts Nash, Manufactue Stackelbeg, an Retaile Stackelbeg gae oels between the anufactue an the etaile espectively an solves the optial cabon eission euction ecisions of the anufactue an the etaile in these oels. The iffeences between the optial ecisions an pofits of supply chain entepises in these oels ae analyze an copae. It is conclue that copae with Nash gae, Stackelbeg gae can not only achieve a highe level of cabon eission euction, but also bing oe pofits. Theefoe, supply chain entepises shoul choose the optial gae stategy base on thei own goals an bagaining powe. On this basis, we can futhe consie the coopeation of cabon eission euction between supply chains entepises to optiize the ecision of low-cabon supply chain entepises. An the ipact of govenent policies (e.g., cabon subsiies an cabon taxes on the cabon eission euction ecisions of entepises with iffeent powe stuctues can also be exploe in the futue. 6. Acknowlegents This eseach was suppote in pat by the National Science Founation of China (poject no.:7570. Refeences Chaabane, A., Rauhin, A., & Paquet, M. (0. Designing supply chains with sustainability consieations. Pouction Planning & Contol, (8, Du, S., Zhu, J., Jiao, H., & Ye, W. (05. Gae-theoetical analysis fo supply chain with consue pefeence to low cabon. Intenational Jounal of Pouction Reseach, 5(, Elhehli, S., & Meick, R. (0. Geen supply chain netwok esign to euce cabon eissions. Tanspotation Reseach Pat D: Tanspot an Envionent, 7(5, He, L., Zhao, D., & Xia, L. (05. Gae theoetic analysis of cabon eission abateent in fashion supply chains consieing vetical incentives an channel stuctues. Sustainability, 7(4, Hsu, C. W., Kuo, T. C., Chen, S. H., & Hu, A. H. (0. Using DEMATEL to evelop a cabon anageent oel of supplie selection in geen supply chain anageent. Jounal of Cleane Pouction, 56, Hua, G., Cheng, T.C.E., & Wang, S. (0. Managing cabon footpints in inventoy anageent. Intenational Jounal of Pouction Econoics, (, Ji, J., Zhang, Z., & Yang, L. (07. Cabon eission euction ecisions in the etail-/ual-channel supply chain with consues' pefeence. Jounal of Cleane Pouction, 4,

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