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.