Sustainable inventory model with price dependent demand under cap-and-trade policy

Abstract

Cap and trade can be effective in reducing emissions and promoting sustainability by providing a clear measurable target and a flexible, market-based mechanism for achieving that target. In this paper, demand is taken as selling price dependent. The effect of inflation is also taken into consideration. We developed a sustainable inventory model with a cap-and-trade policy. The model aims to find the optimal inventory level for a retailer that balances economic sustainability and environmental responsibilities. By considering the cost of carbon emissions and the financial impact of inventory levels on the company, the model helps managers make informed decisions about inventory control that support both economic and environmental goals. The numerical illustration is carried out by using the software Mathematica 12.0. Sensitivity analysis is carried out to see the behavior of different parameters on an optimal solution.