Co-op advertising and emission reduction cost sharing contracts and coordination in low-carbon supply chain based on fairness concerns

• Published in: Journal of cleaner production 2016-10, Vol.133, p.402-413
• Main Authors: Zhou, Yanju, Bao, Maojing, Chen, Xiaohong, Xu, Xuanhua
• Format: Article
• Language: English
• Subjects: Co-op advertising; Co-op advertising and emission reduction cost sharing; Fairness concerns; Low-carbon supply chain; Pareto improvement
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2016.05.097

Governments' energy-saving emission reduction policies and consumers' low-carbon preference have important implications for an enterprise's production operations. In this paper, we consider a low-carbon supply chain channel with one manufacturer and one retailer and show how to optimize the low-carbon supply chain management decision and improve the supply chain performance through contract design. This paper analyzes how the co-op advertising contract and the co-op advertising & emission reduction cost sharing contracts impact the low-carbon supply chain's optimal decision and coordination. We also explore how the optimal decision and coordination change when a retailer has fairness concerns. We have several findings. First, regardless of whether or not the retailer has fairness concerns, a co-op advertising contract cannot achieve channel coordination, but can enhance channel effectiveness; Second, when the retailer does not have fairness concerns, the co-op advertising and emission reduction cost sharing contracts can achieve channel coordination and achieve win–win situation under certain conditions; Third, the retailer's fairness concerns can change the co-op advertising and emission reduction cost sharing contracts' coordination in some cases. Our study contributes to the theoretical basis for the design of low-carbon supply chain cooperation contracts, especially in cases where the retailer has fairness concerns. •We consider a low-carbon supply chain with one manufacturer and one retailer.•The CA contract can't achieve channel coordination.•Retailer's fairness concerns can change CA-ERCS contracts under certain conditions.•The CA-ERCS contracts are better than those solely using the CA contract.