Abstract
In this paper, we study how the manufacturer balances the investment between the green product and the ordinary product as consumer environmental awareness (CEA) increases. The green product and ordinary product have a basic commonality traditional quality but difference between the premium environmental quality and premium traditional quality. With the cost constraint, we present manufacturer’s optimal strategy: producing one product or two products and the optimal traditional quality of the ordinary product or the optimal environmental quality of the green product. Then, we further study the effect of government subsidy and tax on manufacturer’s strategies and analyze the effectiveness of the policies. Finally, we give some numerical examples and sensitivity analysis. The main findings are as follows: (1) manufacturer’s cost constraint affects product’s optimal quality but may not influence manufacturer’s optimal product strategy: the manufacturer may not produce two products even through the budget is sufficient large; (2) the government policy could induce the manufacturer to invest green product but may be inefficient; the subsidy and tax policies are mutual exclusion; and either subsidy or tax could play a role in changing manufacturer’s strategy. Some management insights are given.
Highlights
Environment pollution has attracted public attention including the consumers, industries, and governments
Considering the impact of consumer environmental awareness, we introduce environmental quality as a demand enhancement factor in the product demand function [5, 6]. e green product provides greater environmental benefits than the ordinary product but has a higher price
We study the optimal ordinary product’s and the green product’s configurations as consumer environmental awareness (CEA) increases in recent years
Summary
Environment pollution has attracted public attention including the consumers, industries, and governments. Manufacturers with the cost constraint will not have sufficient budget to develop green product, and they tend to invest more on developing ordinary product, especially when the ordinary product with high traditional quality still attracts more consumers. The manufacturer needs to determine to develop the ordinary product or green product and improve the traditional quality of the ordinary product or the environmental quality of the green product to maximum his profit. We find the following: (1) Manufacturer’s cost constraint affects product’s optimal quality but may not influence manufacturer’s optimal product strategy: the manufacturer may not produce two products even through the budget is sufficiently large, and the manufacturer may choose to invest two products even when the budget is very small; (2) e government policy could induce manufacturer to invest green product but may be inefficient when CEA and prices of the two products satisfy a certain condition; (3) e cost coefficient of environmental quality, CEA, and green product’s price are significant factors to influence manufacturer’s strategy.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
