Green product design in supply chains under competition

Abstract

In this paper, we investigate the green product design issues in supply chains under competition. Our research questions address how supply chains’ decisions on the “greenness” of products are affected by factors such as supply chain structures (centralized and decentralized), the green product types (development-intensive product or marginal-cost intensive product), and the types of competition (price competition and greenness competition). With a game-theoretic approach, our model starts with a simple supply chain with one manufacturer and one retailer. Then the model is expanded to include a horizontal retailer competition case and six cases of competing supply chains. Our results indicate that, 1. the distortion from a non-coordinated supply chain (the double marginalization effect) has counter-intuitive impact on the degree of product “greenness”; 2. supply chain price competition at the retailer level may positively influence the equilibrium greenness while the product greenness competition reduces the equilibrium greenness, and the joint impact from price and greenness competition on equilibrium greenness depends on the relative strength of the two types of competition.