Green Product Development and Order Strategies for Retailers

Abstract

In this study, we consider a green supply chain to encompass two competing retailers, whose market demands include a stochastic component and a deterministic component, and we assume that consumer returns exist. We use game theory to determine the optimal decisions that retailers could make regarding greenness level and purchase quantity in either competitive environments or monopoly environments, and we perform sensitivity analysis. We show that the optimal greenness level and the purchase quantity for the stochastic demand are both higher in a competitive environment than those in a monopoly environment when the consumer return rate is low; therefore, competition is more beneficial to the increasing of the greenness level of products and the market supply than monopoly environments. We also show that, in a competitive environment, the optimal greenness level, the purchase quantity for the stochastic demand, and the revenue of retailers increase as the retail price increases, or as the wholesale price, the greenness R&D investment cost coefficient, and the consumer return rate decrease, and that this finding remains true in a monopoly environment, except that the optimal greenness level is found to increase as the return rate increases in the case of a monopoly environment. Finally, we suggest that the government should break monopolies, encourage positive competition, support small- and medium-sized companies, and subsidize the green industry to increase the greenness level of products and market supplies.