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Channel Structure Strategies of Supply Chains with Varying Green Cost and Governmental Interventions

Deyan Yang (), Jinyong Wang () and Dongping Song ()
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Deyan Yang: Business School, Jiangsu Normal University, Xuzhou 221116, China
Jinyong Wang: College of Computer Science and Technology, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Dongping Song: Management School, University of Liverpool, Liverpool L69 3BX, UK

Sustainability, 2019, vol. 12, issue 1, 1-26

Abstract: Environmental concerns make enterprises pay more attention to green manufacturing. The emerging green supply chain inevitably will compete with the traditional supply chain. In order to evaluate the competitiveness of supply chains and the impact on channel structure strategy, we develop four game models for two competing supply chains according to their channel structure strategies. Green marginal manufacturing cost, demand sensitivity of green level, and governmental interventions are considered. We study how retail prices, green levels, and profits are influenced by channel structure choice and governmental interventions. Analytical results indicate that the substitutability of products affects channel structure strategy. When the substitutability of products is relatively low, centralization–centralization is the unique Nash equilibrium. However, when the substitutability of products is relatively high, both centralization–centralization and decentralization–decentralization are the Nash equilibriums. Centralization–centralization is a prisoner dilemma, while decentralization–decentralization can make the green supply chain achieve optimal profit. Then, the green marginal manufacturing cost and demand sensitivities of the green level play important but different roles in channel structure strategy of the competing supply chains. Further, whether Nash equilibriums are the optimal strategy depends on governmental intervention. Relatively severe governmental intervention might realize a relatively higher green level, but may not always achieve the lowest retail price for the green supply chain. However, a relatively moderate governmental intervention might achieve a relatively lower green level.

Keywords: green supply chain; governmental intervention; channel competition; green cost structure; game theory (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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