Differential game analysis of carbon emissions reduction and promotion in a sustainable supply chain considering social preferences

We incorporate consumer low-carbon awareness and social preferences, including relationship and status preferences, into a game of emissions reduction and promotion involving one manufacturer and one retailer using a long-term perspective. We investigate the channel members’ decision making and performance under three scenarios, including a decentralized scenario both with and without a cost-sharing contract as well as a centralized scenario. In addition, we examine the effects of some key parameters on the channel members’ decisions and performance. Our study finds that improving consumer low-carbon awareness is beneficial for carbon emissions reduction and both channel members’ utilities. A cost-sharing contract can incentivize the retailer to improve promotion efforts, and the manufacturer’s optimal emissions reduction effort is independent of the cost-sharing contract used. The cost-sharing proportion increases as the manufacturer gives more weight to the relationship and decreases as the retailer gives more weight to the relationship. A cost-sharing contract changes the effect of channel members’ social preferences and marginal profits on their decisions. Most importantly, the supply chain system can achieve Pareto improvement with a cost-sharing contract. If the manufacturer aims to optimize the supply chain’s total profit, then the supply chain system can achieve perfect coordination with a cost-sharing contract.