Game analysis in green supply chain considering three channel structures

Kun Liu

Abstract


In this paper, we examine a supply chain system consisting of a manufacturer and a retailer, who put in efforts for ‘greening’ their operations. We consider three different decision making structures and discuss the optimal model from each player’s perspective. In model 1, the manufacturer invests in greening and sets the wholesale price for the product. The retailer then invests in greening and sets the retail price. In model 2, the manufacturer invests in greening followed by the retailer’s investment in greening effort. Then, the manufacturer sets the wholesale price and the retailer sets the retail price. Finally, in model 3, both players simultaneously invest in greening effort. Subsequently, the manufacturer sets the wholesale price and the retailer sets the retailer price. Our analysis shows that the manufacturer’s expected profit is the highest in model 1 the retailer’s expected profit is the highest in model 3. Model 1 will lead to the highest gross profit of supply chain. The retailer’ highest greening efforts are employed in model 1.The comparison of manufacturer’ greening effort in model 1 and model 3 depends on the cost of retailer’s greening effort. The manufacturer’ will be higher in model 1 if the cost of retailer’ greening effort is sufficiently low. Otherwise model 3 yields higher greening effort.


Keywords


Green supply chain;game analysis;greening effort.

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