Contract adoption of motivating green technological innovation in a supply chain

Abstract

Green technological innovation has been widely recognized around the world; however, consumer environmental awareness may result in uncertain market demand growth and lead to manufacturers’ risk‐averse attitude towards green technological innovation. This paper focuses on the contract adoption problem of a risk‐averse manufacturer who is responsible for green technological innovation, through a resell contract (RC) or agency contract (AC) with a retail platform. Stackelberg models are built, and the conditional value at risk method is used to measure the manufacturer's risk‐averse behavior. The differences between two contracts are compared. We find that when the commission rate is less than some threshold, the green technological level under AC is greater than that under RC regardless of the fixed cost coefficient, otherwise the green technological level under RC is higher. Further, there is the dual excellent region for AC and RC where the manufacturer can not only obtain a higher level of green technology but also achieve better utility. Finally, consumer surplus and social welfare under two contracts are performed through numerical experiments.