Abstract
The consumer environmental awareness promotes green manufacturing and the behavioral preferences of members become prevailing in supply chain management. To promote further development of green supply chains, a two-echelon green supply chain with a manufacturer and a retailer is considered, where the manufacturer is loss-averse and the retailer is risk-neutral. We use a Stackelberg game to investigate the impacts of loss aversion and green efficiency coefficient on retail price, wholesale price, green degree, profits of members, and profit of the green supply chain under the assumption that manufacturer’s reference point of loss aversion is equal to the subgame perfect equilibrium partition. It is shown that, in the centralized decision-making setting (CDS), green degree and profit of the green supply chain are higher than those in the decentralized decision-making setting (DDS), while in the decentralized decision-making setting with a loss-averse manufacturer (DDS-LAM) loss aversion of manufacturer further decreases green degree and profit of green supply chain. It is also found that profits of the manufacturer and the retailer decrease with levels of loss aversion of manufacturer. Furthermore, it is also shown that wholesale price and retail price in the three decision-making settings depend on the green efficiency coefficient. Wholesale price and retail price in DDS-LAM are always the lowest (highest) if the green efficiency coefficient is sufficiently high (low). Finally, executing a greening cost-sharing contract can improve chain members’ profits if the retailer shares an appropriate proportion with the loss-averse manufacturer.
Highlights
With the continuous development of global industrialization, the living environment of human beings is being severely damaged [1], which makes the concept of sustainable development, including low-carbon economy and green GDP, receive extensive attention
The manufacturer’s behavioral preference of loss aversion is formalized by Shalev’s model of loss aversion, where the subgame perfect equilibrium partition is regarded as a reference point of loss aversion
We investigate the impacts of loss aversion and green efficiency coefficient on retail price, wholesale price, green degree, profits of members, and the profit of the entire green supply chain under three decision-making settings
Summary
With the continuous development of global industrialization, the living environment of human beings is being severely damaged [1], which makes the concept of sustainable development, including low-carbon economy and green GDP, receive extensive attention. Tversky and Kahneman introduced a value function to characterize loss aversion of a decision-maker [19], which is applied to supply chain management. An important issue is still left behind that the reference point cannot capture the decision-maker’s reference dependence endogenously emphasized by Tversky and Kahneman [22] To address this issue, the subgame perfect equilibrium partition in the Rubinstein alternating-offers bargaining game is introduced as a reference point to formally depict perceptively loss compromise in this paper. The idea of this paper is similar to that of Du et al, i.e., the alternating-offers bargaining game is used to form manufacturer’s loss-averse reference point in members’ own minds first and members play a Stackelberg game based on this reference point.
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