Retailer anticipated regret under carbon tax policy

School of International Business and Management, Sichuan International Studies University, Chongqing 400031, P.R. China

^* Corresponding author: zxqcqspb@163.com

Received: 18 December 2023
Accepted: 17 August 2024

Abstract

Environmental policies such as carbon tax implementation significantly impact the technology choice and cost structure of the upstream manufacturer, affecting the downstream retailer’s the procurement decision and risk management in a sustainable supply chain. This study constructs a single-manufacturer-single-retailer supply chain model constrained by carbon tax policies to analyze the influence of retailer’s anticipated regret on the supply chain operation and environmental performance. Utilizing game theory, the research finds that the retailer’s anticipated regret behavior suppresses manufacturer’s willingness to invest in the green initiative, resulting in a non-monotonic effect on profits. When the retailer’s regret level is low and her demand for eco-friendly products is also low, the manufacturer tends to reduce the green investment and increase the wholesale price to maximize the marginal return. Although such the anticipated regret behavior by the retailer may stimulate the manufacturer’s profit growth, it reduces retailer’s profit. Conversely, as the retailer’s regret level increases, the manufacturer increases the green investment and reduces the wholesale price to induce higher procurement by the retailer, leading to a decline in the manufacturer’s profit but an upward trend in the retailer’s profit. This discovery suggests that the upstream supply chain manager, should closely the monitor retailer’s potential anticipated regret and adjust the corresponding strategy accordingly. Furthermore, the study finds that the lower level of retailer’s anticipated regret positively impact environmental behavior, offering the policymaker a new perspective on promoting the green supply chain practice.