Cost-sharing models for green product production and marketing in a food supply chain

Abstract

PurposeThe purpose of this paper is to explore the coordination mechanism of cost sharing for green food production and marketing between a food producer and a supplier who both contribute to the sales of green food.Design/methodology/approachThis paper first develops demand functions for both a food supplier and a producer, considering their influence on green degree of food and associated consumers’ acceptances. Then, cost-sharing contracts-based game models are proposed. At last, regarding to optimal supply chain profits and green performance, the proposed contracts and the non-coordination situation are compared and tested by a real case.FindingsWhen green cost is only shared by one side, the cost-sharing contracts cannot optimally coordinate the food supply chain, but it can improve profits for both the supplier and producer. When consumers’ sensitivity to the green degree of food increases, a mutual cost-sharing contract will bring more profits for both the supplier and producer than those under the non-coordination mode in a decentralized supply chain situation. A real case verifies the conclusions.Research limitations/implicationsThe models are in complete information, and the market demand is assumed to be linear to sales price. Mutual cost sharing is only for material processing and food production, which can be extended to include sharing for sales cost. Coordination ideas on the proposed contracts development and solutions for optimal decisions can be applied in the other industries.Practical implicationsThe study shows that coordination between a supplier and a producer is needed to improve the food supply chain’s green performance.Originality/valueThis paper first extends the existing profit functions by considering the green efforts of both a supplier and a producer as well as their effects on green degree of products and consumers’ acceptances to the green degree.