In-house production and outsourcing under different emissions reduction regulations: An equilibrium decision model for global supply chains

A primary dilemma for multinational firms facing different emissions reduction regulations is determining what to produce in-house and what to outsource. We study a supply chain with manufacturers and overseas suppliers each facing different carbon tax rates. We present an inhouse production and outsourcing equilibrium decision model as well as a modified projection algorithm for this supply chain. Numerical examples focus on examining how carbon tax rates and consumer's carbon awareness affect in-house production and outsourcing decisions. Analysis of the numerical results provides important managerial insights and carbon policy implications which are thoroughly discussed in this paper.

Automated summary

This paper examines a supply chain with manufacturers and overseas suppliers facing different carbon tax rates and presents an equilibrium decision model for in-house production and outsourcing. Numerical examples analyze the impact of carbon tax rates and consumer's carbon awareness on production and outsourcing decisions, providing important managerial insights and implications for carbon policies.