Stochastic Differential Games of Carbon Emission Reduction in the Four-Tier Supply Chain System Based on Reference Low-Carbon Level

Lingfei Li, Jingyu Wu, Minting Zhu, Mancang Wang and Yaoyuan Li ()
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Lingfei Li: School of Public Administration, Northwest University, Xi’an 710127, China
Jingyu Wu: School of Economics and Management, Northwest University, Xi’an 710127, China
Minting Zhu: School of Economics and Management, Northwest University, Xi’an 710127, China
Mancang Wang: School of Economics and Management, Northwest University, Xi’an 710127, China
Yaoyuan Li: School of Public Administration, Northwest University, Xi’an 710127, China

Sustainability, 2024, vol. 16, issue 19, 1-38

Abstract: This paper takes corporate social responsibility goodwill and consumers’ reference low-carbon level as endogenous variables of joint carbon emission reduction in the “supplier–manufacturer–retailer–consumer” supply chain system. The joint carbon emission reduction strategies of this four-tier system are analyzed from a dynamic perspective by considering random factors that affect the endogenous variables. Three stochastic differential games are proposed to examine the mechanism between each player, namely the cooperative model, Nash non-cooperative model, and Stackelberg master–slave model. Compared to the Nash non-cooperative game, the manufacturer/supplier-led Stackelberg master–slave game leads to Pareto improvement in the profits of the entire supply chain system and each player. The cooperative game demonstrates the highest expected emission reduction and corporate social responsibility goodwill, but also the highest variance. More importantly, the reference low-carbon level embraces consumers’ subjective initiative in the dynamic of carbon emission reduction. This level is an internal benchmark used to compare against the observed low-carbon level. This paper provides a theoretical foundation for strategic decision-making in emission reduction, contributing to sustainable development. By addressing environmental, economic, and social sustainability, it promotes climate action through carbon reduction strategies and offers policy recommendations aligned with the Sustainable Development Goals.

Keywords: stochastic differential game; emission reduction; supply chain; reference low-carbon level (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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