Green Product Design With Engineering Tradeoffs Under Technology Efficient Frontiers: Analytical Results and Empirical Tests

Abstract

To implement green product design, many companies today utilize the product-line strategy to develop environment-friendly products for customers with different willingness-to-pay for the environmental attributes of a product. One major challenge in designing green products is how to deal with the engineering tradeoff between the traditional and environmental attributes along the technology efficient frontier. In this paper, we conceptualize the technology efficient frontier in green product design, and perform theoretical and empirical analyses on the design decisions under different functional forms of efficient frontiers. We develop an analytical framework for identifying the optimal designs under general forms of efficient frontiers, and propose a novel use of trigonometric functions to analyze the design decisions under the linear, concave, and convex efficient frontiers. Additionally, we analyze the average environmental qualities under different efficient frontiers and show that switching between different product-line strategies allows a firm to achieve higher average environmental quality as an alternative to pushing the efficient frontier outward through technology advancement. Moreover, we conduct empirical tests to demonstrate how to empirically identify an efficient frontier and estimate key model parameters. Our analytical results provide new insights for decision makers to manage and regulate green product design with engineering tradeoffs.