Contracting pricing and emission reduction for supply chain considering vertical technological spillovers

Under the environment of technological spillover, carbon abatement investment has become one of key factors on cutting reducing carbon emission, which includes production costs in the components and products. Based on demand with price elastic, we study a dyadic supply chain consisting of a retailer and a manufacturer to explore a two-echelon Stackelberg model for obtaining the optimal decisions of decentralized and centralized supply chain within the dominated manufacturer. With the coordination contract through revenue-cost sharing, setting the decentralized profits of players as the disagreement points, the manufacturer and the retailer can achieve the goal of centralized scenario, which can promote the members to increase the carbon abatement investment and decrease the retail pricing. Finally, by theoretical comparison and numerical analysis, the results show that technological spillovers amplify the impact of "free-ride" behavior, which the supplier always has incentives to reduce carbon emission, but the cooperation of players will achieve as well as improves the profits only when technological spillovers are large.