Equilibrium decisions and coordination of a logistics service supply chain with bilateral corporate social responsibility

Abstract

This paper establishes centralized decision-making models (CDMM) and decentralized decision-making models (DCDMM) for a two-echelon logistics service supply chain (LSSC) composed of an integrator and a functional provider. This takes into consideration implementation of corporate social responsibility (CSR). The equilibrium decisions are obtained and the impacts of CSR on the price, service level, consumer surplus, profit, and utility of the LSSC are discussed. A newly designed two-part pricing contract ensures implementation of CSR. We demonstrate that (1) under DCDMM, improvement of the functional provider’s CSR has more positive effects on the level of service, market demand, consumer surplus, overall profit, and utility of the LSSC than the same level of CSR for an integrator. (2) An increase of one member’s CSR upgrades the profit of the other members but damages its own profits. Therefore, LSSC members’ final profits will depend on the influence of CSR on both sides. (3) There is an optimal total critical CSR value for an integrator and functional provider. If the sum of both CSR values exceeds this, the profit under CDMM will be less than that under DCDMM, and LSSC members need not implement contract coordination. Finally, a numerical example is used to verify the relevant conclusions.