Green product design with competition and fairness concerns in the circular economy era

Abstract

In this paper, we consider green product design in a supply chain consisting of one manufacturer and two retailers, where retailer 1 aims at monetary profit maximization, and retailer 2 has fairness concern. We consider two kinds of green products: a marginal-intensive green product (MIGP) and a development-intensive green product (DIGP). For the former, the green investment cost depends on the green level and the production quantity; while for the latter, the green investment cost depends on the green level solely. In each case, we investigate the impact of the retailer's fairness concern by comparing the optimal solutions and supply chain performance with those in the basic models in which all the supply chain members aim at profit maximization. We find that retailer 2 will set a higher retailing price and earn a smaller market share. Such inferiority increases as retailer 2's inequity aversion increases or as the substitutability degree of the products offered by the two retailers increases. We also find that retailer 2's fairness concern will always harm the manufacturer. If an equity outcome is achieved, the supply chain may achieve a better performance; however, if an inequity outcome is attained, the supply chain always performs worse.

Pricing Decisions in Closed-Loop Supply Chains With Multiple Fairness-Concerned Collectors

“…In the field of fairness concern, Yang et al [20] believed that the retailer's fairness concern brought disadvantages to him. Pu et al [21] found that the retailer's fairness concern could strongly influence the manufacturer's decisions and negatively affect the expected profits. Li et al [22] believed that the retailer's fairness concern hurt the manufacturer while putting himself at a disadvantage.…”

Game theory applications in production research in the sharing and circular economy era

“…A circular economy (Govindan and Hasanagic 2018;Howard, Hopkinson, and Miemczyk 2018) commonly refers to an economy or economic system which aims to be environmentally sustainable (Li et al 2019a(Li et al , 2019bCai and Choi 2019;Guo, Choi, and Shen 2020) with the minimisation of wastage and maximisation of activities such as reuse, recycle and remanufacturing (3R). The circular economy has been used in district planning (Liu et al 2012).…”

“…They finally develop a simplified supply chain contract to enhance the performance of the retailer as well as social welfare. Li et al (2019a) investigate the circular supply chain using game theory with the paper entitled the 'Green Product Design with Competition and Fairness Concerns in the Circular Economy Era'. Similar to Shen, Xu, and Choi (2019), the authors also explore the 'optimal green product design' decision.…”

“…However, the supply chain structure is different. To be specific, Li et al (2019a) explore a single manufacturer two-retailers supply chain system. The authors differentiate the two retailers by assuming one of them possesses the profit maximisation objective whereas the other retailer has a fairness concern in its objective.…”

“…(4) When the product quality levels between the green and non-green products are sufficiently different, developing and selling the green product achieves all win. Circular supply chain management Li et al (2019a) (1) Green product development (2) Two competing retailers (3) Fairness concerns of one retailer…”