Using game theory to describe strategy selection for environmental risk and carbon emissions reduction in the green supply chain

This paper provides an approach in the context of green supply chain management, using game theory to analyze the strategies selected by manufacturers to reduce life cycle environmental risk of materials and carbon emissions. Through the application of the ‘tolerability of risk’ concept, a basis for determining the extent of environmental risk and carbon emissions reduction has been established. Currently, scant attention is given to holistic supervision of the supply chain with respect to carbon emissions by governments, and thus the starting hypothesis here is that the default strategy that manufacturers will adopt is only to reduce carbon emissions, and thereby environmental risk, in so far as this is compatible with the aim of increasing revenue. Moreover, we further hypothesize that, once necessary governmental policy has been established in the supply chain management, the strategic choices of the manufacturers would be influenced by government penalties or incentives. A case example is provided to demonstrate the insight that indicates the application of game theory. The limitations of the game model and analysis are discussed, laying a foundation for further work.

► Provide an approach using game theory to limit environmental burden within supply chain.
► Analyze the strategies selected by the manufacturers of ‘hazardous’ materials to increase TBL performance.
► Determine the extent of reduction in environmental risk and carbon emissions by ‘tolerability of risk’.
► A case example is provided to show how a manufacturer uses game theory for decision making.
► Identify major factors involved in the game model, especially the influence of governmental punitive and incentive policies.