Green Product Design and Pricing Decisions in a Risk-Averse Supply Chain under Alternative Power Structures

Tiantian Xu,Jizhou Zhan,Viacheslav Kalashnikov

doi:10.1155/2021/1946215

Abstract

Motivated by the prevailing green product design and the different supply chain power structures, this paper aims to analyse the role of power relationship and risk-aversion in economic and environmental performance of sustainable supply chain. Three game theory models, including the manufacturer Stackelberg (MS) model, retailer Stackelberg (RS) model, and vertical Nash (VN) model, are developed to study the pricing and greenness level decisions in a two-echelon sustainable supply chain, where one risk-averse manufacturer sells green products through one risk-averse retailer. This paper shows that when selling through a more risk-averse retailer, the risk-averse manufacturer prefers to provide a product with a higher level of greenness and achieve a greater utility regardless of the power structure. A manufacturer as a follower may have stronger motivation to increase the product’s level of greenness than one in a more balanced supply chain when the green technology investment coefficient is sufficiently low. With regard to the power structure, the channel leadership is not necessary to for the manufacturer to achieve higher utility, which depends on the green technology investment coefficient, greenness level sensitivity, and players’ risk aversion.

Highlights

In today’s marketplace, progressive enterprises recognize that sustainable operations are crucial for long-term development [1]
We focus on the impacts of power structure together with risk behaviors of players on the greenness level and pricing decisions in this study
Similar to Tsay [46] and Agrawal and Seshadri [55], this study investigates the case where the players measure the random profits based on the meanvariance method. e risk of the player is evaluated by the variance of the profit

Summary

Introduction

In today’s marketplace, progressive enterprises recognize that sustainable operations are crucial for long-term development [1]. Firms in different industries have begun to use various methods to improve the sustainability of their operations and the greenness level of their product, such as using recycled or green materials, integrating pollutionabatement facilities, and reducing the volume of package materials [2, 3]. To increase the greenness level of products, Gree, a Chinese electric appliances’ manufacturer, insists on sustainable investment by integrating environmental considerations into the design of their products to diminish the energy use and carbon emission. Manufacturers generally shoulder the responsibility for designing and producing green products while the investments in sustainable development may benefit other participants [5]. When designing green products, manufacturers should pay attention to the trade-off between costs and benefits and consider the decisions of other players in the supply chain. It is imperative for the manufacturer to make a thoughtful trade-off to make green product design decisions in the supply chain

Objectives

Discussion

Conclusion