Quality, Greenness, and Product Line Choices for a Manufacturer With Environmental Responsibility Behaviors

Abstract

Motivated by the rising environmental protection awareness and the importance of green product design, in this article we develop two models to investigate the quality and greenness decisions and product line choices of a green manufacturer as well as the corresponding impact of product line length on environmental performance. In our models, both the manufacturer and consumers show environmental responsibility behaviors. We find that the manufacturer extends the product line when the unit fit cost, the green cost, the quality cost, the market scale of low-segment consumers, and the environmental responsibility level (or unit environmental cost) are low. In the presence of two products with different market positioning, our analysis reveals that: first, owing to the consumer's self-selection behavior, product quality and greenness may be distorted from the efficient quality and greenness; second, product line extension may improve both the environmental performance and the manufacturer's utility, i.e., achieving a win–win outcome; and third, a higher unit environmental cost (environmental responsibility level or a longer product line) will improve the environmental performance if the unit environmental cost is high. In the continuous green valuation setting, interestingly, we find different results that the manufacturer with a high environmental responsibility level may extend its product line, and the environmental performance increases with the unit environmental cost in the single-product case.