Channel structure and evolutionary stability analysis between traditional and green service supply chains

Abstract

This paper aims to explore the optimal pricing and green service decisions and discuss the evolutionary stability strategy (ESS) of vertical channel structure strategic interaction between the traditional and green service supply chains (TSSC and GSSC). Considering these two supply chains could choose between the centralized (C) and decentralized (D) channel structures, current research establishes four channel models, namely, Models DD, DC, CD and CC, wherein Model DD(CC) means that both supply chains adopt channel D(C) and Model DC(CD) refers to GSSC adopting channel D(C) while TSSC using channel C(D). Furthermore, an evolutionary game is developed to explore the ESSs of the dynamic competitive system. The research results show that the stronger the integration between upstream and downstream firms of GSSC is, the higher green service the supply chain would provide when TSSC adopts channel D. Besides, when the market competition is sufficiently low, only point (0,0) is the ESS; when it is moderate, there exist two ESSs, i.e., ESS (0,0) and ESS (1,1); when it is extremely high, only point (1,1) is the ESS. The numerical examples show that the green service level increases in market competition while some retailing and wholesale prices under specific models would not be affected by it or show an inverted U shape, and the initial states of two supply chains’ channel strategies significantly impact the system’s ESSs.