Using Game Theory to Explore the Multinational Supply Chain Production Inventory Models of Various Carbon Emission Policy Combinations

Jialiang Pan, Kun-Shan Wu (), Chih-Te Yang (), Chi-Jie Lu and Shin Lu
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Jialiang Pan: School of Business and Management, Jiaxing Nanhu University, Jiaxing 314001, China
Kun-Shan Wu: Department of Business Administration, Tamkang University, New Taipei City 251301, Taiwan
Chih-Te Yang: Department of Business Administration, Tamkang University, New Taipei City 251301, Taiwan
Chi-Jie Lu: Graduate Institute of Business Administration, Fu Jen Catholic University, New Taipei City 24205, Taiwan
Shin Lu: Department of Biomedical Imaging and Radiological Sciences, National Yang Ming Chiao Tung University, Taipei 11221, Taiwan

Mathematics, 2024, vol. 12, issue 10, 1-18

Abstract: This study uses Stackelberg game theory, considering different combinations of carbon emission reduction policies and that high-carbon-emission enterprises may face various carbon emission reduction regulations, to explore the production inventory problems in a multinational supply chain system. The purpose is to determine the manufacturer’s optimal production, shipping, carbon reduction investment, and the retailer’s replenishment under the equilibrium for different carbon emission policy combinations. To develop the production inventory models, this study first develops the total profit and carbon emission functions of the supply chain members, respectively, and then obtains the optimal solutions and total profits of the manufacturer and the retailer under different carbon emission policy combinations through the mathematical analysis method. Further, this study used several numerical examples to solve and compare the proposed models. The results of numerical analysis show that regardless of the increase in carbon price or carbon tax, the manufacturer and retailer will adjust their decisions to reduce carbon emissions. Specifically, an increase in the carbon price contributes to an increase in the total profit of manufacturers, while an increase in the carbon tax reduces the total profit of manufacturers. This study also explores a sensitivity analysis on the main parameters and has yielded meaningful management insights. For instance, in cases where low-carbonization strategies are required, the manufacturer or retailer can effectively reduce the carbon emissions resulting from production or purchasing activities, thereby significantly reducing overall carbon emissions. It is believed that the results of this study can provide enterprises/supply chains with reference to their respective production, transportation, carbon reduction investment, and inventory decisions under carbon emission policies, as well as information on partner selection and how to adjust decisions under environmental changes.

Keywords: inventory; game theory; carbon emissions; multinational supply chain (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
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