Optimal environmental quality and price with consumer environmental awareness and retailer's fairness concerns in supply chain

Abstract

This paper focuses on the impacts of consumer environmental awareness (CEA) and retailer's fairness concerns on environmental quality, wholesale price and retail price of the green product in a one-manufacturer and one-retailer supply chain. The manufacturer produces one green product, and the green product has the environmental quality. This study compares three decision scenarios: decentralized model (Scenario1), retailer is fair-minded and incurs an unfavorable disutility (Scenario 2), retailer is fair-minded and incurs a favorable disutility (Scenario 3). Assume that the manufacturer is the leader, the retailer is the follower, we apply the backward method to solve the Stackelberg game and give the optimal solutions of the environmental qualities, wholesale prices and retail prices.Our analysis reveals that (1) retailer's fairness concerns will not change the environmental quality of the green product, and only affect the wholesale price and retail price; (2) retailer's power in the supply chain and the degree of the fairness concerns jointly determine whether the retailer benefits from the fairness concerns; (3) fairness concerns may change the trend of the retailer's profit with CEA when the retailer is concerned about favorable disutility.