Optimal Pricing and Green Product Design Strategies in a Sustainable Supply Chain Considering Government Subsidy and Different Channel Power Structures

Abstract

Green product design is a vital measure to support sustainable development in a circular economy era. This paper studies the multi-product pricing and green product design strategies under different supply chain structures and government subsidy strategies. Considering different channel leadership, we establish the centralized (C), manufacturer-led (MS), and retailer-led (RS) supply chain models, respectively. By applying a game-theoretical approach, corresponding equilibrium pricing, green product design, and government subsidy decisions under different supply chain structures are obtained. Through comparison and numerical analysis, we find that: (1) the different subsidy strategies of the government have an important impact on green product development. When the government provides a uniform subsidy strategy, a RS supply chain can bring greener product, more market demands, more profit, and more social welfare; (2) when the government provides a differentiated subsidy strategy, MS and RS supply chain structures can bring greener product and more market demand than the centralized supply chain. They can also bring the same social welfare and the same product to the green design level. However, the MS supply chain structure can bring more profit for the firm; (3) the consumers’ green awareness positively impacts the design and development of green product. Therefore, it is beneficial for the firm to adopt reasonable measures to boost the environmental awareness of consumers in order to realize the sustainable development of our society.

Impacts of Supply Chain Competition on Firms’ Carbon Emission Reduction and Social Welfare under Cap-and-Trade Regulation

“…For the government, the carbon quota is a kind of financial subsidy and brings direct economic profit to the supply chain, which cannot be used to incentive the firm to invest in CER technology and reduce carbon emissions. This finding complements related research (e.g., [ 15 , 28 ]). The government should also enact policies and take measures to motivate the competition among supply chains.…”

“…The investment cost of CER technology for manufacturers can be expressed by a quadratic function, i.e., , where is manufacturer ’s CER level and is the cost coefficient. This quadratic cost function is widely used in the relevant literature, e.g., Wei et al [ 52 ], Xue et al [ 15 ] To simplify the analysis and focus on the impacts of supply chain competition on carbon emission reduction, we do not consider the production costs of manufacturers. Symbols and notations used in this paper are concluded in Table 2 .…”

“…In recent years, an increasing number of consumers show low-carbon preference and are willing to pay more for low-carbon products [ 13 , 14 , 15 ]. In the first half of 2017, the number of people purchasing green products on JD.com, a well-known e-commerce platform in China, increased by 62.2% year on year.…”

Incentive Mechanisms for Carbon Emission Abatement Considering Consumers’ Low-Carbon Awareness under Cap-and-Trade Regulation

“…For example, some scholars have studied the supply chain’s green/low-carbon technology investment issue. Xue et al [ 17 ] studied green product design strategies under different supply chain structures and government subsidy strategies. Dong et al [ 18 ] examined who should lead the investment in green product development in a supply chain.…”

“…The manufacturer’s investment cost of CEA technology can be expressed by a quadratic function, i.e., , where is the low-carbon products’ CEA level, and is a cost coefficient. This quadratic cost function is widely used in the relevant literature, e.g., Xue et al [ 17 ], Wei et al [ 51 ]. The variable production cost of each low-carbon product is assumed to be .…”