Coordinated contracts in a two-echelon green supply chain considering pricing strategy

Three possibilities (consumer environmental awareness, cap and trade regulation, and production of low-carbon products) are usually employed by a supply chain during production to reduce the carbon emission and its devastating effects on human life. The high costs of reducing the emission raise the price of product, which can be in apposite of customer's affordability, and to solve this problem the cooperation and coordination contract as the solutions used to provide low-carbon products with suitable price. Therefore, in this research, we expand a two-echelon supply chain consisting of one manufacturer and one retailer, which sells one kind of product with lower carbon emission. The market demand depends on price of product and the rate of carbon reduction. Supply chain analyzed in both cooperative and non-cooperative forms. In non-cooperative form, game theory approach, including Nash and Stackelberg games are applied to find optimal decision variables and profits of supply chain and its members; furthermore, three coordination contracts, including wholesale price (WP), cost sharing (CS), buyback (BB) contract to enhance the supply chain' performance are used. The results show that supply chain's profit in the cooperative form is higher than non-cooperative one. Moreover, a comparison between contracts indicates that the supply chain in WP contract in both Nash and Stackelberg games has the highest profit and can coordinate the chain.