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Make or buy? It is the question: A study in the presence of carbon tax

Author

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  • Meng, Xiaoge
  • Yao, Zhong
  • Nie, Jiajia
  • Zhao, Yingxue

Abstract

In this paper, we explore make-or-buy decision of a manufacturer, taking the effect of carbon tax (CT) into account. We characterize the optimal strategies including the production quantity, wholesale price, and CT rate with the CT rate considered exogenous or endogenous, respectively. We also examine the optimal make-or-buy strategies for the manufacturer under different levels of CT rate. In addition, We conduct an analysis for the government regarding when it should or should not regulate the CT rate. With the studies, some significant managerial findings are obtained for the make-or-buy decision making in the presence of CT. In particular, it is found that in addition to CT rate level, the ratio between marginal environmental cost and marginal gross profit of the product (without excluding CT) can essentially affect whether or not the government should regulate the CT rate.

Suggested Citation

  • Meng, Xiaoge & Yao, Zhong & Nie, Jiajia & Zhao, Yingxue, 2018. "Make or buy? It is the question: A study in the presence of carbon tax," International Journal of Production Economics, Elsevier, vol. 195(C), pages 328-337.
    • Handle: RePEc:eee:proeco:v:195:y:2018:i:c:p:328-337
    DOI: 10.1016/j.ijpe.2017.10.029
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    Citations

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    Cited by:

    1. Zhou, Xiaoyang & Wei, Xiaoya & Lin, Jun & Tian, Xin & Lev, Benjamin & Wang, Shouyang, 2021. "Supply chain management under carbon taxes: A review and bibliometric analysis," Omega, Elsevier, vol. 98(C).
    2. Zhang, Ling & Zhang, Zheng, 2022. "Dynamic analysis of the decision of authorized remanufacturing supply chain affected by government subsidies under cap-and-trade policies," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    3. Yang, Yuxiang & Goodarzi, Shadi & Jabbarzadeh, Armin & Fahimnia, Behnam, 2022. "In-house production and outsourcing under different emissions reduction regulations: An equilibrium decision model for global supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    4. Wenxue Ran & Teng Xu, 2023. "Low-Carbon Supply Chain Coordination Based on Carbon Tax and Government Subsidy Policy," Sustainability, MDPI, vol. 15(2), pages 1-19, January.
    5. Jingpei Ma & Xuejun Sun, 2023. "Green technology licensing: Evaluating government subsidies based on different efficiency levels across competitors," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1920-1934, June.
    6. Bai, Qingguo & Xu, Jianteng & Gong, Yeming & Chauhan, Satyaveer S., 2022. "Robust decisions for regulated sustainable manufacturing with partial demand information: Mandatory emission capacity versus emission tax," European Journal of Operational Research, Elsevier, vol. 298(3), pages 874-893.
    7. Dingzhong Feng & Lei Ma & Yangke Ding & Guanghua Wu & Ye Zhang, 2019. "Decisions of the Dual-Channel Supply Chain under Double Policy Considering Remanufacturing," IJERPH, MDPI, vol. 16(3), pages 1-20, February.
    8. Tang, Xiaoying & He, Yong & Salling, Melissza, 2021. "Optimal pricing and production strategies for two manufacturers with industrial symbiosis," International Journal of Production Economics, Elsevier, vol. 235(C).
    9. Jin Zhao & Qi Xu, 2024. "Pricing and Inventory Decisions for the Apparel Industry under a Carbon Neutrality Target with Green Investments and Recycling Efforts," Sustainability, MDPI, vol. 16(14), pages 1-25, July.
    10. He, Peng & He, Yong & Xu, Henry, 2019. "Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy," International Journal of Production Economics, Elsevier, vol. 213(C), pages 108-123.

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