Kuiti, Mithu Rani and Basu, Preetam and Ghosh, Debabrata (2022) Incentive conflict and supply contracts under carbon cap policy. PLoS One, 17 (11). e0277777-e0277777. DOI https://doi.org/10.1371/journal.pone.0277777
Kuiti, Mithu Rani and Basu, Preetam and Ghosh, Debabrata (2022) Incentive conflict and supply contracts under carbon cap policy. PLoS One, 17 (11). e0277777-e0277777. DOI https://doi.org/10.1371/journal.pone.0277777
Kuiti, Mithu Rani and Basu, Preetam and Ghosh, Debabrata (2022) Incentive conflict and supply contracts under carbon cap policy. PLoS One, 17 (11). e0277777-e0277777. DOI https://doi.org/10.1371/journal.pone.0277777
Abstract
Environmental regulations, once promulgated, can cause incentive conflict between manufacturers and suppliers. A manufacturer facing the regulation may undertake choices that can affect his sourcing decisions with the supplier. To analyze this, we develop a game-theoretic model considering a manufacturer who faces a per-unit carbon emissions cap and sources from a supplier. The manufacturer operates in a carbon sensitive market. We analyze the responses of the manufacturer and supplier and show that since the burden of carbon emissions cap is borne by the manufacturer, the first-best outcomes are not reached. Therefore, the supplier may offer different contracts to incentivize the manufacturer. We study two mechanisms: the two-part tariff and the revenue-and-investment sharing contracts. We show how such contracts achieve coordination and deliver efficient supply chain outcomes. Interestingly, we find that the contract preferences of the manufacturer and the supplier may not be the same and vary under different market conditions. Summarily, we highlight important considerations for the supply chain players in designing suitable incentives.
Item Type: | Article |
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Uncontrolled Keywords: | Carbon; Motivation; Decision Making; Policy |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 18 Nov 2022 12:43 |
Last Modified: | 30 Oct 2024 20:55 |
URI: | http://repository.essex.ac.uk/id/eprint/33943 |
Available files
Filename: journal.pone.0277777.pdf
Licence: Creative Commons: Attribution 3.0