Scope
In (Zhang and Yu, 2023) develops three-level differential game models for a Low Carbon Closed-Loop Supply Chain (LC-CLSC) that includes manufacturers, retailers, and the government. Its purpose is to guide these stakeholders in making optimal decisions regarding pricing, emission reduction, and recycling investments, while also helping governments set effective subsidies for emission reduction and recycling. The study examines four different decision-making scenarios—manufacturer-led, retailer-led, non-led, and centralised decision-making—to capture the effects of various power structures within the supply chain.
Summary
This work analyses how power dynamics influence optimal strategies in LC-CLSCs. In manufacturer-led scenarios, manufacturers tend to set higher wholesale prices and invest more in emission reduction, whereas in retailer-led scenarios, retailers set higher retail prices and focus more on recycling investments. In non-led scenarios, decisions are made independently, resulting in more balanced outcomes, while centralised decision-making achieves overall supply chain optimisation with lower total subsidy rates. Additionally, the study finds that government subsidies are crucial in balancing the power differences, often providing higher subsidies to the weaker party, which ultimately benefits recycling efforts and social welfare compared to unilateral control.
In more detail, key findings indicate that the decision-making models and power structure significantly affects the optimal strategies for pricing, emission reduction, and recycling investments. In manufacturer-led scenarios, manufacturers set higher wholesale prices and invest more in emission reduction compared to retailer-led scenarios. In retailer-led scenarios, retailers set higher retail prices and invest more in recycling compared to manufacturer-led scenarios. Non-led scenarios, where neither party dominates, result in more balanced investments and pricing strategies. Additionally, government subsidies for emission reduction and recycling play a crucial role in balancing the power dynamics within the supply chain. The weaker party in the supply chain (whether manufacturer or retailer) tends to receive higher subsidy rates, which encourages them to invest more in emission reduction and recycling. The total subsidy rate is highest in non-led scenarios and lowest in centralised decision-making scenarios. Also, the non-led case is found to be more beneficial for recycling and social welfare compared to unilateral domination.
Relevance for EXIGENCE
The decision-making models in (Zhang and Yu, 2023) study, highlight the importance of power structures and government subsidies in optimising the performance of low-carbon strategies in closed-loop supply chain. The models provide valuable insights for achieving coordination and improving overall efficiency in a chain of stakeholders. Equivalent decision making models and power structures can be transferred in the development of incentive mechanisms in the EXIGENCE use cases, and the insights of this paper can be utilised towards the optimisation of the individual and overall energy and carbon efficiency of the involved stakeholders.
Ζ. Zhang and L. Yu. Dynamic decision-making and coordination of low-carbon closed-loop supply chain considering different power structures and government double subsidy. Clean Technologies and Environmental Policy, vol. 25, no. 1, pp. 143-171, 2023.
