Cost-sharing contract design between manufacturer and dealership considering the customer low-carbon preferences

Manufacturers and dealerships usually have a long-term cooperation in selling low-carbon products produced by signing a contract without considering the dynamic changes in consumer’s low-carbon preferences. Consumers’ low-carbon awareness and the low-carbon reputation of those low-carbon products occasionally alternate affected by the market circumstances, which will influence the selling of low-carbon products. This paper focuses on the contract design between a manufacturer and a dealership using Stackelberg differential game models to formulate the long-term contract between a manufacturer and a dealership. To promote the low-carbon reputation of low-carbon products, two cost-sharing contracts, including a one-way cost-sharing contract (OWC) and a two-way cost-sharing contract (TWC), are proposed. The manufacturer in the OWC contract provides a certain amount of subsidies to incentivize the dealership. The manufacturer and the dealership share costs in the TWC contract. Besides, dual-channel models are also analyzed as an extension of the proposed model. Several findings were obtained by solving and analyzing the proposed game models. The manufacturer’s emission reduction efforts and the dealership’s low-carbon promotion efforts are influenced by dealership’s