Optimizing Joint Sustainable Supply Chain Decision-making under Emission Tax: A Stackelberg Game Model

In practice, manufacturers and retailers jointly make decisions by capitalizing on decision interactions while respecting the carbon emission tax and subsidy determined by local governments. Though studies have been published to address the joint decision-making, they involve only a very few of the important supply chain decisions due to the problem complexities. In this study, we investigate a comprehensive joint decision-making of a manufacturer and his independent retailer with considering both carbon emission tax and subsidy. Per the decision interactions, we analyze the decision-making of the manufacturer and the retailer as a Stackelberg game. The game model developed, by nature, is a mixed 0-1, non-linear, and bilevel programming. In view of its complexity, we further develop a nested genetic algorithm (NGA) to solve the model. Numerical examples demonstrate the applicability of the game model in facilitating supply chain members to jointly make decisions and the robustness of the NGA. With Sensitivity analysis, we shed light on several important managerial implications.