Abstract
Cost sharing contracts is one of the most common contracts to coordinate green supply chains. In this paper, we examine whether it can coordinate green supply chains in the set up of overconfidence. We assume that the manufacturer is overconfident and the retailer is rational. The manufacturer overestimates consumers’ sensitivity to product greenness and accurately estimates the uncertainty of demand. The overconfident manufacturer and the rational retailer cooperate through cost sharing contracts. Then, we construct a game theoretical model to analyze the impact of manufacturers’ overconfident on product greenness, pricing, profit and supply chain cooperation. At last, a numerical experimentation is presented. We find that, (1) the product greenness, wholesale price and retail price increase with the manufacturer’s overconfidence as well as the retailer’s cost sharing proportion. (2) no matter how much the cost sharing proportion is, the profit of manufacturers and retailers decreases with the manufacturer’s overconfidence level. (3) cost sharing contracts can achieve the green supply chain coordination in rational setting. But under manufacturers’ overconfidence, it cannot.
Highlights
Economic development has brought a series of problems such as environmental pollution and resource depletion, which has aroused the increasing concerns of consumers, enterprises and governments to green products
This paper considers a green supply chain that consists of one overconfident manufacturer and one rational retailer
The lower the cost sharing proportion is, the faster the profit decreases with overconfidence level
Summary
Economic development has brought a series of problems such as environmental pollution and resource depletion, which has aroused the increasing concerns of consumers, enterprises and governments to green products. Ghosh and Shah (2015) studied green degree decisions and pricing of products in green supply chains, and coordinated the supply chain with revenue sharing contracts [3]. Xu et al (2017) studied decisions of the green supply chain output and greenness under carbon trading constraints They found wholesale price contracts and cost sharing contracts can achieve green. Xu et al (2019) studied the impact of retailers' overconfidence on supply chain performance in a duopoly market composed of an overconfident retailer and a rational retailer selling the same products [10]. These literatures mainly focus on the impact of decision makers' overconfidence on non-green product in operation management.
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