Participative pricing and donation programs in a socially concerned supply chain

Abstract

AbstractThis study analyzes a participative pricing scheme, name‐your‐own‐price, as a practical marketing mechanism for a socially sustainable supply chain. There is an ongoing argument on the profitability of participative pricing. This study introduces a different approach in capturing optimal decisions of a corporate social responsibility practice. In the proposed approach, the manufacturer is willing to donate as long as, (I) business image is improving; thus, the potential market size is expanding and, (II) consumers are also donating through the proposed donation scheme. Results indicate that not only the total earnings are increasing, the market participation is also boosted. Further, operational decisions are coordinated successfully with a revenue‐sharing contract. Findings imply that there is a minimum threshold for manufacturer's participation ratio to ensure the profitability of the proposed scheme, not to mention consumer's donation size. Sensitivity analysis is conducted to prove the applicability of the proposed mechanism in real‐world applications.