Decision models of pricing and carbon emission reduction for low-carbon supply chain under cap-and-trade regulation

All carbon emissions generated by supply chain (SC) members should be taken seriously. This paper constructs low-carbon SC models consisting of one supplier and one manufacturer under three power structures: supplier -led power structure, manufacturer-led power structure, and Nash competition power structure. Based on dif-ferential game theory, we explore SC members' optimal pricing and carbon emission reduction decisions by considering the impacts of consumers' low-carbon preference, cap-and-trade regulation, and power structure from a long-term perspective. The results indicate that consumers' low-carbon preference always benefits the environment and low-carbon SC performance. However, whether cap-and-trade regulation can improve the environment and low-carbon SC performance depends on the cap and the carbon trading price. Under three power structures, we provide the government with two important threshold caps: one threshold cap ensures that SC members can benefit from cap-and-trade regulation; another threshold cap ensures that SC members can obtain positive profits under cap-and-trade regulation. This paper also reveals that the decision-making priority is not a necessary condition for SC members to maximize profits.