Decisions and Coordination of Retailer-led Low-carbon Supply Chain under Altruistic Preference

Abstract A low-carbon supply chain formed by a dominant retailer and a small and medium-sized manufacturer (SMM) is considered. Because the SMM faces the high cost pressure of adopting carbon emission reduction (CER) technologies, the retailer may take an altruistic preference for the long-term sustainability of the chain. Three decision-making models, centralized, decentralized without altruistic preference, and decentralized with altruistic preference, are constructed to compare decisions and profits of both parties. Since neither decentrailized models can lead to a coordinated solution that is incentive compitable, a coordination contract, referred to as the cost sharing contract with altruistic preference, is proposed. Numerical study shows that the altruistic preference can help increase the SMM's profit and system efficiency but decrease the retailer's profit. The coordination contract requires the retailer to adjust the unit profit and share more than half of the CER cost. It is found that the wholesale price is the lowest in the coordination contract and the comparison of unit profit depends on the coefficient of CER cost.