Joint decisions on selling mode choice and emission reduction investment under cap-and-trade regulation

Consumers' growing awareness of environmental protection and carbon regulations enacted by the government based on strengthened environmental pressure are forcing manufacturers to curb carbon emissions. This paper considers a manufacturer investing in green technology to reduce carbon emissions under the cap-and-trade regulation, selling products to consumers through a direct channel and an online retail platform. The platform could choose to operate either in an agency mode or a reselling mode. A three-stage game is constructed to examine the interactions between the manufacturer's investment and the platform's operation mode under the cap-and-trade regulation, as well as the influences of the regulation on the interactions, and the supply chain coordination. The findings suggest that green technology investment in either operation mode leads to Pareto improvement in profits of both the platform and the manufacturer, and the investment induces the platform to prefer the reselling mode. Besides, the cap-and-trade regulation encourages the platform to opt for the agency mode, while the investment could mitigate the influence of the regulation on the platform's mode choice, with greater investment efficiency resulting in better mitigation. Furthermore, the investment could induce supply chain coordination under two modes through two different contracts.