The research on abatement strategy for manufacturer in the supply chain under information asymmetry

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

7 Scopus Citations
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  • Jian Li
  • Qin Su
  • Kin Keung Lai

Related Research Unit(s)


Original languageEnglish
Article number117514
Journal / PublicationJournal of Cleaner Production
Online published10 Jul 2019
Publication statusPublished - 1 Nov 2019


The government is a key factor in encouraging enterprises to reduce emissions, but private information hiding by enterprises seriously affects the efficiency of reducing emissions for enterprises, and even the supply chain, it is necessary to further extend information asymmetry between the government and enterprises in previous research and apply this to the supply chain level. This paper constructs a supply chain consisting of the manufacturer and supplier, considers the moral hazard and adverse selection between the government and manufacturer, builds a single-layer principal-agent model and double-layer principal-agent model including the supplier and compares the abatement strategies of the manufacturer in the two models, and designs the government's incentive contracts for the manufacturer of the supply chain on reducing emissions. The results show that H (high cost) manufacturer only obtains the reservation revenue, and L (low cost) manufacturer can obtain additional revenue. The significance of the government paying information rent to L manufacturer is in ensuring that L manufacturer has no motivation to hide type information and that the manufacturer can choose appropriate incentive contracts in an effort to join the supplier in reducing emissions. The manufacturer obtains more revenues by increasing the incentive intensity for the supplier, but this is not necessary for the government, so the government must reach a deal with the manufacturer to avoid the loss of revenues. These findings will be helpful to policy-makers and managers.

Research Area(s)

  • Abatement strategy, Incentive contracts, Principal-agent, Supply chain