Research on Supply Chain Emission Reduction Decisions Considering Loss Aversion under the Influence of a Lag Effect

Abstract

Considering that a lag effect exists in R&D investment, investigating the impacts of manufacturers’ resulting loss-averse behavior on R&D investment in carbon emission reduction technologies is important. This paper establishes three differential game models, namely centralized decision making, decentralized decision making with the manufacturers’ rational preferences, and decentralized decision making with the manufacturers’ loss-aversion preferences. The models are used to analyze the mechanism of the lag effect and loss aversion on manufacturers’ R&D investment in emission reduction, based on a two-level supply chain consisting of manufacturers and retailers. This study finds that: (1) The lag effect can encourage manufacturers to invest in the R&D of emission reduction technologies. (2) There is a threshold value for the lag time, and only when the lag time is higher than this threshold value will manufacturers display loss-averse behavior. (3) When manufacturers’ degree of loss aversion is small, loss-averse behavior has a negative effect on their investment in the R&D of emission reduction technologies, while the opposite has a positive effect.