Green supply chain analysis under cost sharing contract with uncertain information based on confidence level

Abstract

In this paper, we study supply chain coordination issues arising out of green supply chain consisting of a manufacturer and a retailer under cost sharing contract with uncertain information. Instead of expected utility maximization, we present an alternative decision rule based on confidence level, that is, both the manufacturer’s and the retailer’s aims are to maximize the potential incomes under their confidence levels. First, we obtain the equilibrium values for the decentralized and the centralized channel cases under the given confidence levels, then compare the equilibrium values between the decentralized channel case and the centralized channel case to motivate cost sharing contract framework. Second, we consider the retailer participates in the green channel and obtain that the manufacturer and the retailer incur higher profits in the cost sharing contract case than the decentralized supply chain case. Third, we propose a cost sharing contract between the players who bargain on the cost sharing parameter, and the contract benefits the manufacturer significantly through sharing of costs with the retailer.