Manufacturer’s R &D cooperation contract: linear fee or revenue-sharing payment in a low-carbon supply chain

This paper studies one manufacturer’s optimal co-development payment under different power structures in a low-carbon supply chain with one manufacturer, one technology firm, and one retailer. The manufacturer could collaborate with the technology firm on developing low-carbon technology through linear fee or revenue-sharing payment. Our results demonstrate that the manufacturer’s optimal payment depends on the technology firm’s low-carbon level. If the manufacturer collaborates with a relatively low-level (high-level) technology firm, she should choose linear fee (revenue-sharing) payment, regardless of power structures. If the technology firm’s low-carbon level is intermediate, the optimal payment varies with power structures. Meanwhile, the manufacturer’s optimal payment is also beneficial to the environment due to more emission reductions. Besides, no matter under which payment type, as the manufacturer’s market power becomes strong, both the manufacturer’s and the technology firm’s profits increase.