Differential game modelling of joint carbon reduction strategy and contract coordination based on low-carbon reference of consumers

Recently, there is a growing awareness and preference of low-carbon lifestyle among consumers. Therefore, every enterprise is faced with the task of carbon reduction in the production process. This paper sets up a differential game model for a two-level supply chain, and introduces low-carbon preference into the model. Then, the equilibrium strategies of the supply chain were analyzed under centralized and decentralized decision-makings, and the impacts of low-carbon reference on carbon reduction in the supply chain were discussed in details. Furthermore, the bilateral component sharing contract was adopted to coordinate the supply chain. The results of theoretical analysis were verified with an example. The results show that: the product goodwill trajectory is monotonic, while the low-carbon reference trajectory changes direction once at most. The introduction of low-carbon reference can promote the carbon reduction of the supply chain, but interestingly, when the memory parameter of low-carbon preference tends to infinity, or the sensitivity coefficient of low-carbon reference approaches zero, the carbon reduction effect of the supply chain will not change. Bilateral cost-sharing contract can effectively coordinate the supply chain, and encourage supply chain members to implement carbon reduction. The contract structure is not affected by the low-carbon reference. This research provides theoretical supports to dynamic carbon reduction of supply chains based on low-carbon reference. (C) 2020 Elsevier Ltd. All rights reserved.