Government intervention on a competing supply chain with two green manufacturers and a retailer

Abstract

This paper investigates the Government (Govt.) intervention on the decisions of a two-echelon supply chain (SC) members competing and cooperating with one another. The environment-conscious Govt. tries to reduce environmental impacts (EIs) of the green products having different greening levels (environment friendliness). At the same time, Govt. makes an effort to generate some specific Govt. net revenue (GNR) from the SC members. The EIs of the products are accounted for based on the amount of carbon emission which determines the greening level of the products. The GNR is generated from the collected taxes and penalty at the trading price for the extra amount of emissions. The Govt. encourages manufacturers to produce greening products by contributing some subsidy. The investigated SC consists of two competitive manufacturers producing separately one of two substitutable greening products and selling to a common retailer by make-to-order business policy. The retailer sells to the customers against their demands based on the selling prices, indirect taxes and greening levels. We develop non-linear bi-level interactive models between the Govt. and SC members. The Govt. is top-level decision maker collecting taxes from retailer paid by customers and paying subsidy/imposing fine to the manufacturers. At the bottom level, there are SC members. The manufacturers horizontally follow Nash-equilibrium and vertically Stackelberg leader-follower decisions among the manufacturers and retailer or cooperating with each other. Finally, numerical experiments are performed on the models and different decisions are derived under nine scenarios. Sensitivity analyses showing the effects of model parameters are presented. It is observed that whoever becomes the leader, his/her profit is maximum amongst the scenarios and within the scenario, who has the highest demand, he/she dominates. Some managerial insights are also presented.