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Optimal strategies for manufacturer with strategic customer behavior under carbon emissions-sensitive random demand

Wen Jiang (College of Architecture and Urban-Rural Planning, Sichuan Agricultural University, Chengdu, China AND School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China)
Xu Chen (School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China)

Industrial Management & Data Systems

ISSN: 0263-5577

Article publication date: 9 May 2016

1284

Abstract

Purpose

The purpose of this paper is to investigate the manufacturer’s production, pricing and green technology investment decision problem when strategic customer behavior and carbon emissions-sensitive random demand is taken into consideration and discuss the impact of carbon emissions-sensitive demand on the manufacturer’s operation strategies, total carbon emissions and maximum expected profit.

Design/methodology/approach

The authors formulate a model to introduce carbon emissions-sensitive demand into the newsvendor framework with strategic customer behavior. The authors characterize the rational expectations equilibrium to derive the optimal solutions to the manufacturer. The authors analyze the effects of carbon emissions-sensitive demand on the manufacturer’s optimal strategies, total carbon emissions and maximum expected profit by comparative analysis.

Findings

The authors obtain the manufacturer’s optimal production, pricing and green technology investment strategies under rational expectations equilibrium in scenario of price-sensitive demand and that of carbon emissions-sensitive demand, respectively. The authors find that as customer demand changes from price-sensitive demand to carbon emissions-sensitive demand, the manufacturer’s optimal prices are the same but optimal production quantity, optimal unit carbon emissions and maximum expected profit go down. Though the total emissions decrease, the carbon emissions reduction would not increase as the demand is more carbon emissions-sensitive. Whether it increases or decreases depends on the model parameters.

Originality/value

Carbon emissions-sensitive demand and strategic customer behavior are considered simultaneously in an integrated model. The result can guide the manufacturer decision-making. The proposed model are hoped to shed light to the future works in the field of sustainable supply chain management.

Keywords

Citation

Jiang, W. and Chen, X. (2016), "Optimal strategies for manufacturer with strategic customer behavior under carbon emissions-sensitive random demand", Industrial Management & Data Systems, Vol. 116 No. 4, pp. 759-776. https://doi.org/10.1108/IMDS-08-2015-0321

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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