Equilibrium Decisions Research Articles

Uncertain green product supply chain with government intervention

Green product supply chain management is increasingly becoming a new trend due to the growing awareness of environmental issues and the continuous development of industrial eco-processes. In this study, a two-echelon supply chain with government intervention involving a single manufacturer and a single retailer is examined. Due to the lack of actual data, the market size, price elasticity, demand function, and production cost are assumed to be unreliable variables. On the basis of various risk attitudes, the uncertain expected value, optimistic value, and mini–max chance constraint game theoretic models are developed. Equilibrium decisions for different planning models are derived. An analysis of equilibrium decisions and profits is conducted through numerical experiments examining the effects of confidence level, government intervention, green level, and price sensitivity. Based on the results of the data analysis, it appears that the manufacturer and retailer are able to reach different equilibrium decisions by adopting distinct risk attitudes. Furthermore, government intervention can facilitate the coordination of parameter-based decision-making and supply chain conflicts.

Can “ugly veg” supply chains reduce food loss?

The tradition of marketing only aesthetically agreeable produce by retailers contributes to a major source of food loss through “ugly veg”, i.e., the produce that does not look “regular”. In this paper, we examine the relations between different tiers of agri-food supply chains to study the impact of marketing ugly veg on different supply chain members and the food loss in the system. We examine and compare scenarios of a centralized supply chain, a traditional supply chain without ugly veg, an ugly veg supply chain with a single retailer offering both regular produce and ugly veg, and a two-retailer supply chain where an auxiliary retailer sells the ugly veg. We characterize the equilibrium decisions in these systems and also provide analytical results and insights on the effectiveness of different supply chain designs based on a comprehensive numerical study. We demonstrate the conditions under which the supply chain can reduce overall food loss. For sufficiently high cost of effort, selling ugly veg through the single retailer reduces food loss. Nonetheless, the grower is generally better off offering the ugly veg to an auxiliary retailer. We show that the ratio of food loss per cultivated land always decreases in the two-retailer supply chain, while the total food loss might increase for sufficiently high cost of effort.

Authorization or encroachment: Effects of channel encroachment on decisions and performance in software service supply chains

At present, plenty of software developers not only sell their software to client firms through downstream service integrators, but also vend it to clients directly. However, little research has been investigated software developers' channel encroachment in the area of software service supply chain (SSSC) management. In this study, we examine a SSSC with a developer, an integrator, and client firms. Clients can either purchase software from the integrator at high prices and with accessorial pre-sale services, or procure it directly from the developer at low prices but with no pre-sale services. After purchasing software, clients can also purchase the extended warranty service (EWS) from the developer. We investigated the two cooperation modes, i.e., the “Authorization” (marked as mode A) and the “Authorization + direct sales” (marked as mode E), and analyzed effects of the developer's channel encroachment on equilibrium decisions of SSSC members and on SSSC performance. It is shown that both the sensitivity of clients to the EWS price and the EWS cost cannot affect the software pricing decision of the integrator in the mode A, but those can affect that in the mode E. Furthermore, when the EWS cost is high, although the developer can obtain the software authorization revenue, the software sales revenue, and the EWS sales revenue (in the mode E), its channel encroachment will unexpectedly cause its own profit to decline. We also find that if the developer participates in the competition with low intensity, its encroachment is detrimental to both parties; only when the developer participates in the competition with high intensity and has a low-cost advantage, its encroachment can increase its own profit, but it may reduce the profit of the integrator and lead to a decrease in the total SSSC profit. However, we are surprised to find that if the developer participates in the competition with high intensity and its EWS cost is high, its channel encroachment not only increases the integrator's profit but also the total SSSC performance.

Will the embedded service in supply chains play a role in lowering manufacturer’s carbon emission and maintaining economic growth?

Introduction: The carbon cap and trade mechanism (CCTM) is forcing companies to reduce carbon emissions. Due to financial and technical constraints, manufacturers responsible for recycling and remanufacturing begin to seek embedded services from energy service companies (ESCOs), marking the emergence of embedded low-carbon service supply chains. The purpose of this paper is to explore the role of embedded low-carbon service in supply chains in lowering manufacturer’s carbon emissions and maintaining economic growth.Methods: In this paper, a decision model for risk-averse closed-loop supply chain for embedded low-carbon service in uncertain markets is built by using the Stackelberg theory and mean-variance (MV) approach. Equilibrium decisions, the manufacturer’s expected utility growth, and total carbon emission reduction are obtained. Sensitivity analysis is performed for the main parameters.Results: The results indicate that only when the manufacturer’s risk aversion level and consumers’ low-carbon preference are within the range of 0.35–0.9, can the manufacturer bring in embedded low-carbon service by cooperating with an ESCO through revenue-sharing contracts. When there is a higher carbon price, embedded low-carbon service can further increase the manufacturer’s expected utility, maintain economic growth and reduce carbon emissions.Discussion: Embedded low-carbon service in supply chains can play a role in lowering manufacturers’ carbon emissions and maintaining economic growth when the manufacturer’s risk aversion level, carbon price, and consumers’ low-carbon preference are high. Theoretically, this study combines closed-loop supply chains (CLSCs) and embedded low-carbon services, enriching supply chain theories. In addition, the findings provide managerial insights for manufacturers, ESCOs, and governments.

Manufacturer encroachment and quality investment decisions in a two‐period supply chain

AbstractWith the development of Internet technology, many manufacturers encroach into the retail market by selling products directly to consumers, which is called manufacturer encroachment. In practice, the manufacturer may encroach in normal sales period, markdown period, or both periods in a two‐period supply chain. It is a challenging task for the firm manager to provide appropriate quality level under different channel structures. This research originally studies manufacturer encroachment with endogenous quality investment decision in a two‐period supply chain considering that consumers' valuation of products depreciates over time. Using a game‐theoretic framework, this work explores four channel strategies of the manufacturer and discusses equilibrium decisions and profits. The analysis generates several insights. First, the manufacturer should promote quality investment if encroachment occurs when the direct selling is efficient. Second, regardless of which period and scenario, encroachment may increase wholesale price when the direct selling cost is smaller than a threshold. Third, results show the effect of encroachment time on price could be classified into quality investment effect, wholesale price effect, and channel‐adding effect. The quality investment effect increases retail price, while the channel‐adding effect and wholesale price effect decrease retail price. Finally, results reveal that encroachment is always the best choice for the manufacturer and it does not always harm the retailer's profits. Overall, our results and managerial insights can help the manufacturer to formulate channel strategies, wholesale price, and selling quantity decisions while help the retailer to make order quantity decision.

Production and carbon emission abatement decisions under different carbon policies: supply chain network equilibrium models with consumers’ low‐carbon awareness

AbstractWith the increasing requirements for environmental protection, authorities have enacted different carbon policies to promote sustainable practices. This study considers the competition among different manufacturers and multiple demand markets in the supply chain network. We examine and compare their equilibrium decision conditions under three common carbon policies: carbon cap, carbon cap‐and‐trade, and carbon tax. Results suggest that under lower carbon caps, manufacturers greatly reduce their carbon emissions by reducing production quantities, which causes a decrease in profits. However, an appropriate carbon cap size can not only motivate manufacturers to reduce carbon emissions but also improve their profits. Under a certain price for carbon credit, the effectiveness of a carbon cap‐and‐trade policy is similar to that of a carbon cap policy, but it has more flexibility. Carbon tax is effective, but it brings more tax burden to manufacturers. We provide implications for companies to optimize their production methods to achieve sustainability.

Selecting Online Channel Mode for Green Products in a Capital‐Constrained Platform Supply Chain

This paper investigates operational decisions and online channel mode selection for green products with an e‐commerce supply chain in which the manufacturer is subject to capital constraint. Starting from a Stackelberg game framework where the platform acts as a leader, two different online channel modes applied with an e‐commerce supply chain are explored for equilibria, respectively. This paper then extends to a different supply chain with a reversed channel leadership, so as to reveal how the supply chain leaderships affect the equilibriums and supply chain performance. With the analytical studies, several important and interesting insights are derived. For example, but not limited to, the following is found: (a) the equilibrium decisions of the capital‐constrained supply chain highly rely on the associated interest rate but are independent of the initial capital level of the financially‐constrained manufacturer; (b) the platform and the capital‐constrained manufacturer act largely differently when choosing the optimal online channel mode for themselves; (c) a win‐win situation benefiting two parties holds when and only when the two members choose the agency mode under certain conditions; (d) the impacts of the supply chain leaderships and online channel modes on the consumer surplus and social welfare are clearly revealed. These results derived in our paper shed lights on industrial practicer on how to effectively make such decision‐making in platform economy. The members in an e‐commerce supply chain can appropriately determine their decisions such as commission and slotting fee to reach a win‐win situation for two parties.

Equilibrium decisions of power supply chain members facing the uncertainty risk of renewable energy production

Equilibrium decisions of power supply chain members facing the uncertainty risk of renewable energy production

Robust Pricing for a Dual-Channel Green Supply Chain Under Fuzzy Demand Ambiguity

The pricing decision is a fundamental problem in a two-echelon dual-channel supply chain, and it is a challenging issue to get the optimal pricing strategy due to high demand ambiguity. Although this problem has been studied by many researchers, the market demand is usually assumed to be deterministic or described as a fuzzy variable with exact distribution information in most of the existing literature. In this article, the uncertain demand is assumed to possess fuzzy uncertainty instead of stochastic nature. In the case that the demand distribution information is partially available, this article proposes a new uncertainty distribution set to depict the demand distribution uncertainty based on the type-2 fuzzy theory. Then, a novel robust pricing game modeling framework is developed for the dual-channel green supply chain with the demand distribution varying in the proposed uncertainty distribution set. Finally, a new method is proposed for obtaining the robust equilibrium decisions of supply chain members. Numerical analysis and comparisons are conducted to demonstrate the impacts of the demand ambiguity on the manufacturer’s equilibrium channel choice strategy. We also demonstrate that our solution results are robust in the setting that the prices of the green products are not equal in the retail and the direct channels.

Differential decision of low-carbon supply chain based on market preferences with fairness concerns

<p style='text-indent:20px;'>Under the dual background of energy economy and environmental protection, expanding the optimal decision-making of the low-carbon supply chain is significant to the energy manufacturing industry. This paper discusses the impact of low-carbon preference, price elasticity, and low-carbon research and development investment (LR & DI) on equilibrium decisions of a three-echelon supply chain system under the scenarios of market segments and fairness concerns. Firstly, it is found that the optimal price and yield are positively correlated with the counterparty's demand elasticity coefficient and sensitivity coefficient, and the supply chain profit is better under the decentralized decision of the retailer's fairness concerns. Secondly, there is a positive correlation between each member's interests and the degree of the manufacturer's fairness concern. While considering the retailer, the manufacturer is responsible for the supply chain income loss. Finally, because the optimal pricing and yield are positively correlated with consumers' low-carbon preference and LR & DI, manufacturers may optimize profits by raising LR & DI within a tolerable range. In addition, it is verified that the Stackelberg game optimizes the traditional model by a numerical example, providing theoretical support for decision-making in different scenarios.</p>

TEDARİK ZİNCİRLERİNDE KARARLARI REVİZE ETMENİN ETKİLERİ

Real life applications reveal that the supply chain actors may revise their decisions such as the wholesale prices or selling prices, when they feel that their decisions are no longer the optimal decisions for them. Motivating from this fact, this study investigates the economic and environmental effects of revising the decisions in a closed-loop supply chain consisting of a manufacturer, a remanufacturer, and a retailer. To this end, we propose game theory based models for the cases where the actors do not have the ability of revising their decisions (Case NR) and the actors have the ability of revising the decisions (Case R). After obtaining the equilibrium decisions in both cases, we compare the decisions under various parameter settings. Computational results bring significant managerial insights regarding the economic and environmental effects of revising the decisions in supply chains.

Does Product Eco-design Promote Remanufacturing: Application of a Stylized Game-theoretic Model

As an effective approach to reduce resource waste and production costs, remanufacturing has elicited extensive attention from the industry and academia. Many electronic original equipment manufacturers (OEMs) have increasingly begun to incorporate product eco-design (PED) into their remanufacturing processes since take-back regulations that hold OEMs responsible for handling their own end-of-life products have gradually become more stringent. The investment costs for the PED implementation vary across different PED effort levels (i.e., high, medium, and low) chosen by the OEM, and different PED effort levels may yield different remanufacturing strategies. In this paper, we develop a stylized game-theoretic model to investigate the impact of PED effort levels on the OEM’s equilibrium decisions (which include production quantities of new and remanufactured products) and supply chain performance in the context of take-back legislation. Our results demonstrate that high PED effort levels do not imply more remanufacturing and that the OEM’s choice of remanufacturing strategies depends on the trade-off between cost savings from remanufacturing and deterministic risks. Interestingly, we find that new products should have a certain level of profitability to ensure the validity of take-back legislation. Due to the substitution and complementary effects between new and remanufactured products, the optimal decisions exhibit different characteristics in remanufacturing strategies. Through a numerical study, we observe that the economic performance decreases with increases in the PED effort level under take-back legislation, but the change in the total environmental impact depends on the PED effort level and the production cost of new products.

Coordinated Decision-Making in Embedded Supply Chain from a Sustainable Development Perspective

Government carbon policies and consumers’ preferences are forcing companies to reduce their carbon emissions. Due to financial and technical constraints, carbon-dependent manufacturers are seeking embedded services from energy service companies. By considering these government carbon policies and consumer preferences, this paper constructs a revenue-sharing contract and a two-part contract model for an embedded low-carbon service supply chain using the Stackelberg game to investigate the contractual coordination between the manufacturer and energy service company and their optimal decision making. The equilibrium decisions and the selection of contracts in the supply chain with different parameter levels were obtained. The model’s validity was verified through numerical simulation analysis, and the impacts of the main parameters on the equilibrium decisions and expected utility for the supply chain were analyzed. The results showed that both contracts would enable manufacturers and low-carbon service providers to achieve profit maximization goals when the parameters meet certain constraints. Changes in consumers’ low-carbon and low-price preferences can cause manufacturers to change their business strategies. In addition, the level of technology of ESCOs affects the selection of the type of contract between manufacturers and energy service companies. The findings described in this paper can provide management insights for manufacturers regarding carbon reduction in practice.

Inducing supplier backup via manufacturer information sharing under supply disruption risk

What comes along with the repeating and wide-range COVID-19 outbreak is the increasingly latent supply disruption risk encountered by global supply chains. Among many instruments to enhance supply chain resilience, backup production may be an appropriate choice, whereas how to induce the supplier backup becomes an obstacle. In this study, we investigate a supply chain in the context of the crisis-like new normal with supply disruption risk, wherein a manufacturer uses private demand information as a strategic lever, according to which a supplier decides whether to adopt backup production. Our findings reveal that the supplier’s equilibrium decision on the adoption of backup production exhibits a cutoff structure when the manufacturer shares demand information. Moreover, we uncover the effect of information sharing on backup decision. In specific, information sharing impedes the adoption of backup production under low demand potential while promoting it under high demand potential. Interestingly, the manufacturer may have the incentive to share the demand information with the upstream supplier if the demand variability is low and the backup cost is moderate, and such information sharing stimulates the supplier to adopt the backup production. Counterintuitively, the manufacturer and the whole supply chain may display nonmonotonic relations to the backup cost as a result.

Financing strategy of transnational supply chain with vertical shareholding under tax system difference: Creditor or guarantor?

Economic globalization enhances the international effect of income tax collection, which significantly impacts the taxable income and cash flow management of a transnational supply chain. This study investigates the financing preferences of the buyer and supplier in a transnational supply chain with vertical shareholding under tax symmetry and asymmetry. The buyer can act as a creditor to provide early payment financing or as a guarantor to help the supplier obtain a low-interest loan. We construct Stackelberg game models to determine the buyer’s and supplier’s equilibrium decisions and profits in two financing strategies under different tax systems. The results indicate that the buyer and supplier have inconsistent financing preferences when the supplier cannot borrow directly from the bank. The buyer always prefers to be a creditor, whereas the supplier’s financing preference depends on the trade-off between the sales revenue, production cost, financing interest, tax cost, and dividends. Surprisingly, we find an optimal shareholding ratio interval related to tax rates that can eliminate double marginalization under tax symmetry, and the supply chain can be more profitable than that under centralized decision-making. However, double marginalization cannot be eliminated under tax asymmetry. The results suggest management implications for the financing strategy choice and operational decisions of a transnational supply chain with vertical shareholding.

Price competition between manufacturers selling to a common retailer under stock-out-based substitution

We consider two partially substitutable products sold through a two-echelon supply chain, consisting of two manufacturers and one retailer. In case of a stock-out in one of the products, that product’s demand can spill over to the competing product. We analyze the equilibrium pricing decisions of the manufacturers and ordering decision of the retailer in a three stage dynamic game for a single period. We investigate the effect of spillover rates on equilibrium decisions. We also evaluate the impact of spillovers being ignored by one of the manufacturers or all parties in the chain. We find that the retailer’s order decision depends on the relative profitability of the products. As spillover rates increase, price competition between the manufacturers intensifies, and hence the double marginalization effect in the chain is mitigated.

International Manufacturer’s Online Marketplace Choice Considering Behavior-Based Pricing

Considering the fact that the phenomenon of consumer behavior-based pricing (BBP) is becoming more prominent in global online sales, an international online channel decision-making model composed of an e-commerce firm and a manufacturer is established. The e-commerce firm is the leader, while the manufacturer is the follower. This study analyzes the decision-making problems in two cases. The first case happens when an international manufacturer establishes its own online-selling website. The second case uses the e-commerce firm’s online-selling platform. We make a horizontal and vertical comparison of equilibrium decision-making for these two participants, respectively. We examine how the manufacturer makes choices and how the e-commerce firm makes decisions about the referral fee rate and franchise fee under the BBP in the international environment. Whether the two players make different decisions between new customers and regular customers is verified. By constructing mathematical models under different channel structures and solving them, and finally, by comparing the equilibrium decisions under different structures and numerical analysis with the help of mathematical software, we have obtained some interesting conclusions. It is found that if the manufacturer establishes its own online-selling website, the e-commerce firm will provide new customers with lower prices than the price for regular customers. At this point, as direct competition forms between the e-commerce platform and the manufacturer, this allows the platform to offer lower prices to new customers in order to attract more new customers to shop on the platform. The manufacturer would differentiate new customers and regular customers according to the unit selling cost of its own website and consumers’ shopping costs. If the manufacturer uses the online-selling platform of the e-commerce firm, the manufacturer will provide a lower price to new customers; however, the e-commerce firm’s attitude to new and regular customers is affected by the referral fee rate. In addition, when the referral fee rate is reduced and the franchise fee is moderated, or the referral fee rate is moderate, and the franchise fee is reduced, the e-commerce firm will decide to attract manufacturers to sell products on its online platform. The manufacturer will give up establishing its own online-selling website and prefer to sell on the e-commerce firm’s online platform.

Equilibrium Decisions on Pricing and the Greenness Degree in Supply Chains under Single- and Cross-Distribution Channels of Green and Nongreen Products and Government Subsidies

Rapid economic growth and industrialization have brought us material abundance and greater convenience, while also causing socio-environmental problems such as the rapid depletion of resources, unexpected natural disasters, and environmental destruction. For these reasons, environmental issues have attracted public and governmental attention around the world over the past few decades. As a result, environmental sustainability has become a critical indicator for evaluating the success and efficiency of supply chain management schemes. For a sustainable supply chain, many governments are employing subsidy policies to encourage consumers to purchase environment-friendly (green) products. This article considers a supply chain composed of two competing manufacturers and two retailers. The first manufacturer produces a green product, while the second manufacturer produces a nongreen product. Each of the two retailers can sell only a green product, only a nongreen product, or both green and nongreen products. In the market, consumers purchasing the first manufacturer’s green products can receive certain subsidies from the government. The amounts of the government subsidies that a consumer receives depend on the greenness degree of the product. Using a three-stage Stackelberg game framework, this article discusses equilibrium decisions on pricing and greenness for four different distribution channel structures. Major findings of this study reveal that (i) the government subsidy has a positive impact on the greenness degree and the demand for green products; (ii) the government subsidy level depends on the manufacturers’ distribution channel strategy types; and (iii) the greater the environmentally negative impact of a green product, the lower the level of the government subsidy paid for purchasing green products. Based on these findings, this article suggests that policymakers focus on establishing the policies that encourage the purchase of green products for the sustainability of a society and a supply chain.

Inventory pooling and pricing decisions in multiple markets with strategic customers

This study considers the pricing and inventory decisions for the retailer selling in multiple markets with strategic customers. The impact of strategic customer behavior on inventory pooling is examined. The equilibrium decisions, in which strategic customers tend to purchase early, are subsequently characterized in the pooled/non-pooled systems. Our results highlight the role of the strategic customer in each market. Compared with myopic customers, the retailer is prone to reduce its inventory for strategic customers. The retailer’s optimal inventory for high-profit products is lower in the pooled system than in the non-pooled system. However, the result is reversed for low-profit products. The analytical and numerical results simultaneously demonstrate that, in the high-profit condition, the retailers’ inventory in the pooled system increases with the correlation coefficient of different markets, while the retailers’ profit decreases with the correlation coefficient. There is an opposite relationship in the low-profit condition. When the markets are less correlated, the retailer owns low inventory but high profit. Moreover, the retailers’ profit is always higher in the pooled system than in the non-pooled system.

Information sharing and sales format strategy under platform economy and cap-and-trade

We develop a low-carbon supply chain including an online retail platform and a manufacturer, taking into account cap-and-trade mechanism. The online retail platform withholding the forecasting demand information chooses whether to share it or not and chooses the reseller format or the agency sales format. The manufacturer produces the low-carbon product and decides the carbon emission reduction level. Therefore, we establish two scenarios (non-information sharing; information sharing) in the reseller format model and the agency sales format model, respectively. Firstly, we derive the members’ equilibrium decisions and explore the online retail platform’s information sharing strategy. We find that the carbon emission reduction efficiency and sales format play important roles in information sharing strategy. Then, we examine the effects of information sharing strategy on carbon emission, consumer surplus, and social welfare. We find that sharing information is always beneficial to the environment, and may create more positive social value. Finally, we investigate sales format strategy and find that it depends on the carbon emission reduction cost.