Green Supply Chain Management with Nash Bargaining Loss-Averse Reference Dependence

Abstract

This paper investigates a two-echelon green supply chain (GSC) with a single loss-averse manufacturer and a single loss-averse retailer. Since the Nash bargaining solution exactly characterizes endogenous power and the contribution of the GSC members, it is introduced as the loss-averse reference point for the GSC members. Based on this, a decision model of the two-echelon GSC with loss aversion is formulated. The optimal strategies of price and product green degree are derived in four scenarios: (a) the centralized decision scenario with rational GSC members, namely the CD scenario; (b) the decentralized decision scenario with rational GSC members, namely the DD scenario; (c) the decentralized decision scenario with the GSC members loss-averse, where the manufacturer’s share is below its own loss-averse reference point, namely the DD(∆m ≥ πm) scenario; (d) the decentralized decision scenario with the GSC members loss-averse, where the retailer’s share is below its own loss-averse reference point, namely the DD(∆r ≥ πr) scenario. Then, a comparative analysis of the optimal strategies and profits in these four scenarios is conducted, and the impacts of loss aversion and green efficiency coefficient of products (GECP) on the GSC are also performed. The results show that (i) GECP has a critical influence on the retail price and the wholesale price; (ii) the GSC with loss aversion provide green products with the lowest green degree; (iii) the retail price, the wholesale price and product green degree are decreasing monotonically with the loss aversion level of the GSC member without incurring loss; (iv) furthermore, the effect of the loss aversion level of the GSC member with incurring loss on the optimal strategies is related to GECP and the gap between the GSC members’ loss aversion levels.

Pricing and coordination in a green supply chain with a risk-averse manufacturer under the reference price effect

“…On the green supply chain coordination mechanism, unlike traditional supply chains, green supply chains focus on improving the greenness level of products and adopt various coordination contracts such as cost-sharing contracts, two-part price contracts, and benefit-sharing contracts to compensate manufacturers for their investment in the greenness level of products (Ghosh and Shah, 2015;Panja and Mondal, 2019;Yi et al, 2021), to coordinate the supply chain system and thus improve the profits of supply chain members. In a green supply chain coordination problem, Ghosh and Shah (2015) compare the effects of the cost-sharing contract and the retailer-manufacturer bargain on the costsharing contract on product greenness, green product price, and supply chain member profitability.…”