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Incentive conflict and supply contracts under carbon cap policy
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 manufac...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Public Library of Science
2022
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9671477/ https://www.ncbi.nlm.nih.gov/pubmed/36395325 http://dx.doi.org/10.1371/journal.pone.0277777 |
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author | Kuiti, Mithu Rani Basu, Preetam Ghosh, Debabrata |
author_facet | Kuiti, Mithu Rani Basu, Preetam Ghosh, Debabrata |
author_sort | Kuiti, Mithu Rani |
collection | PubMed |
description | 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. |
format | Online Article Text |
id | pubmed-9671477 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Public Library of Science |
record_format | MEDLINE/PubMed |
spelling | pubmed-96714772022-11-18 Incentive conflict and supply contracts under carbon cap policy Kuiti, Mithu Rani Basu, Preetam Ghosh, Debabrata PLoS One Research Article 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. Public Library of Science 2022-11-17 /pmc/articles/PMC9671477/ /pubmed/36395325 http://dx.doi.org/10.1371/journal.pone.0277777 Text en © 2022 Kuiti et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. |
spellingShingle | Research Article Kuiti, Mithu Rani Basu, Preetam Ghosh, Debabrata Incentive conflict and supply contracts under carbon cap policy |
title | Incentive conflict and supply contracts under carbon cap policy |
title_full | Incentive conflict and supply contracts under carbon cap policy |
title_fullStr | Incentive conflict and supply contracts under carbon cap policy |
title_full_unstemmed | Incentive conflict and supply contracts under carbon cap policy |
title_short | Incentive conflict and supply contracts under carbon cap policy |
title_sort | incentive conflict and supply contracts under carbon cap policy |
topic | Research Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9671477/ https://www.ncbi.nlm.nih.gov/pubmed/36395325 http://dx.doi.org/10.1371/journal.pone.0277777 |
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