The Impacts of Retailer'S Carbon Tax on the Price and Carbon Reduction Decisions in Supply Chain

In the background of environmental-friendly development, carbon tax plays an important role on curbing carbon emissions in major supply chains. In this paper, the impact of carbon tax imposed to the retailer (RCT) on the decisions and coordination problem in a single supply chain has been explored. For the case with and without RCT, the optimal pricing, carbon reduction decisions and profits of the supply chain members as well as benefits to society and consumers are examined and compared. The key findings are listed below. First, with RCT, the increase of any firm's carbon reduction investment cost factor (CRICF) not only decreases its own carbon reduction effort levels, but also decreases the other firm’s carbon reduction effort level. Second, the presence of RCT increases the extent of the retailer’s effort in carbon reduction, but does not necessarily increases that of the manufacturer. Third, RCT will magnify the impact of the retailer's CRICF on consumer demand, the manufacturer's profit and consumer surplus. Forth, the retailer's CRICF is a critical factor. If the retailer's CRICF is low, RCT will be beneficial to the manufacturer and consumers. Lastly, numerical studies show that, RCT greatly improves the social welfare and increases the profits of the two firms when the retailer's CRICF is relatively low and both the carbon tax and consumers' carbon reduction sensitivity are relatively high