This paper investigates the green channel coordination issue within a two-stage supply chain (SC). The investigated SC sells a non-green traditional product and also plans for releasing a new substitutable green product beside the current traditional product. Demand for both products is a function of the retail price as well as products' green quality and retailer's sales efforts. Both retail price and sales effort level for the green product are decided by the retailer while the product green quality is the manufacturer's decision variable. Three decision scenarios are modelled and compared: (1) decentralized scenario where each member decides independently based on own profit, (2) integrated scenario where there is a one decision maker in the system, and (3) collaborative scenario that aims to enhance the overall channel profit subject to Pareto improvement for each member. Closed-form expressions of optimal retail price, sales effort and green quality are derived for the first two scenarios, and a mathematical programming model is developed for the collaborative scenario. Our numerical investigations revealed that the proposed collaboration model is capable of enhancing the SC profit fairly close to the centralized model and also ensures higher profits for both channel members than the decentralized decision making.

This study analyzes the green channel coordination problem in a two-echelon supply chain where demand is a function of the selling price and the product's green quality.The retailer decides on the selling price while the manufacturer regulates the green quality of the product. To initiate the channel coordination and to establish a win-win outcome for both parties, a hybrid of "greening cost sharing" and "revenue sharing" contract (HGRS) is developed. This study contributes to the literature by providing an analytical approach to address the channel coordination and pricing issues in a green supply chain under the consumer environmental awareness while the manufacturer has the ability of enhancing, with investments, the product's green quality. Our study reveals that: (a) the proposed HGRS contract is capable of achieving channel coordination while both supply chain members gain more profit than in decentralized decision making, (b) the new suggested contract enhances the product's green quality, reduces the selling price, and stimulates the market demand, and (c) HGRS contract results in more satisfied customers (by offering low prices) as well as more sustainable operations (by increasing greenness level) at the same time.

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