Price premium effect, supply contracts and strategic decision making under environmental considerations
Benchmarking: An International Journal
ISSN: 1463-5771
Article publication date: 11 June 2019
Issue publication date: 21 May 2021
Abstract
Purpose
The purpose of this paper is to study the impact of collaboration between supply chain entities in a dyadic setting where the manufacturer invests in greening and technology adoption effort leading to a price premium effect for the supply chain players.
Design/methodology/approach
The paper uses game theoretic approach to analyze the model of inter-firm interaction in a vertical channel setting consisting of a retailer and manufacturer. The paper studies strategic decisions of the channel members in a decentralized and centralized structure and extends this to decision making under contractual settings.
Findings
A two-part tariff completely coordinates the green supply chain, while a cost sharing and revenue sharing contract only achieve partial coordination. Nevertheless, a cost sharing, as well as a revenue sharing contract, increases the greening and technological adoption effort by the manufacturer while yielding the supply chain members a strictly larger profit. Furthermore, a revenue sharing contract in comparison to a cost sharing contract, leads to a larger greening and technological adoption effort by the manufacturer, lower wholesale and retail prices and a strictly larger profit for both the manufacturer and the retailer.
Originality/value
This paper contributes to the green supply chain pricing, technology and contract literature considering strategic interactions between a manufacturer and retailer in a supply chain under price premium effects of greening activities and technological advancements.
Keywords
Citation
Ramani, V., Swami, S. and Ghosh, D. (2021), "Price premium effect, supply contracts and strategic decision making under environmental considerations", Benchmarking: An International Journal, Vol. 28 No. 5, pp. 1665-1696. https://doi.org/10.1108/BIJ-12-2018-0427
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited