Pricing-decision analysis of green supply chain with two competitive manufacturers considering horizontal and vertical fairness concerns.

Abstract

A pricing-decision analysis is a critical aspect of supply chain management since it directly affects manufacturers' and retailers' profits. The members of a supply chain all want to be treated properly during the pricing process, which means that they pay attention to the fairness of the profit distribution. Additionally, consumers are increasingly gravitating to green products as their awareness of green consumption grows. Thus, incorporating consumers' green preferences into a supply chain, this paper investigates pricing decisions with two competitive manufacturers under horizontal and vertical fairness concerns and seeks the optimal degrees of product greenness, prices, profits, and utilities. The game-theoretical models with and without bidirectional fairness concerns are constructed and analyzed to identify the implications on pricing, profits, and utilities of competing manufacturers' bidirectional fairness concerns and consumers' green preferences. Then, we determine the decisional differences between the two designs using comparative analysis and numerical simulation. Finally, propositions, corollaries, and policy implications are derived. The results indicate that consumers' green preferences and competition between manufacturers contribute to increasing the optimal pricing and retailer's profit while harming manufacturers' utilities and the supply chain's profits under some conditions. The findings also demonstrate that horizontal and vertical fairness concerns generate different impacts on the product's greenness degree and pricing. Still, they are detrimental to manufacturers' utilities and supply chain profit while possessing negligible effects on retailer's profit.