Pricing Decisions in a Socially Responsible Supply Chain under Carbon Cap-And-Trade Regulation

Abstract

This article investigates a socially responsible supply chain under the cap-and-trade mechanism. Stylized centralized and decentralized models are established to characterize corporate social responsibility (CSR) in this supply chain. Analytical results reveal that the centralized case always achieves a higher socially responsible channel profit than the two decentralized models, but whether the centralized case achieves a higher pure channel profit than the decentralized scenarios depends on how heavier the weight is placed on CSR: when the weight is modest, the centralized model attains a higher pure channel profit, while a heavier weight on CSR leads to a higher pure channel profit for the two decentralized cases. We further examine how the CSR concern level and a government-set carbon cap-and-trade policy affect the operations of this socially responsible supply chain.