Research On Pricing And Green Innovation Decisions Of Green Supply Chain

With the appearance of environmental regulations of governments around the world and the increase of consumer environmental awareness, the companies in the supply chains must consider the impact on the environment and produce more friendly and green products. The implementation of green innovation can help the companies to decrease the environmental impact in the process of operations and enhance competitive advantages. Considering the implement of green innovation in green supply chain, this paper studies the pricing and green innovation decisions under different scenarios, e.g., vertically cooperative innovation, risk aversion and competitive environment of companies in green supply chain. The game theory is utilized to solve the equilibrium results of the different scenarios. The effects of related factors on equilibrium decisions and equilibrium profit are further analyzed.Firstly, this paper studies the vertical cooperative green innovation decisions in green supply chain. Considering a two-tier supply chain structure that consists of one supplier and one manufacturer with price and green level sensitive demand, this paper analyzes and compares the equilibrium profits of the supplier and manufacturer under three different innovation strategies,i.e. static game, dynamic game and cooperative game, when the supplier conducts green innovation. Finally, we utilize the Rubinstein bargaining model to discuss how to distribute the remaining system profit and how to share the innovation costs. The result indicates that, due to the implement of green innovation by the supplier, the supplier and manufacturer can gain more profits, thereby the profits of the total supply chain become more. Cooperative innovation is a win-win strategy, both the manufacturer and supplier can obtain more profits than non-cooperative game, meanwhile the supply chain system achieves the highest green level and the most profit. The supplier and manufacturer can distribute the remaining system profit and share the innovation costs through the Rubinstein bargaining model. The more patient the player is, the more remaining system profit he will obtain and the less innovation costs he will undertake.Secondly, this paper studies the optimal pricing and green innovation decisions of green supply chain with risk averse decision makers. This paper investigates optimal price and green level decisions of a risk-averse supplier and a risk-averse manufacturer in green supply chain with price and green level sensitive demand under demand uncertainty, when the supplier conducts green innovation. Utilizing the expectation utility theory, we establish the utility function of the supplier and manufacturer. By means of game theory, we analyze the equilibrium results of the three models of different supply chain structures, i.e. supplier Stackelberg model, manufacturer Stackelberg model and centralized supply chain model. We then explore the effects of risk aversion of the supplier and the manufacturer upon the equilibrium decisions. Finally, based on a numerical analysis, we further compare the optimal decisions and utilities of the supplier and manufacturer in the three models. Our results imply that, in the two Stackelberg models, the optimal wholesale price and the green level of the raw material and the final price of the product increase with the risk tolerance of the supplier. The final price of the product increases with the risk tolerance of the manufacturer, while the optimal wholesale price and the green level of the raw material decrease with the risk tolerance of the manufacturer. Both the utilities of the supplier and the manufacturer are positively correlated with their own risk tolerance but negatively correlated with the other’s risk tolerance. Besides, the supplier and the manufacturer can get more utilities by the dominant position in the supply chain. In a centralized supply chain, the price and green level increase with the total risk tolerance of the supply chain. Compared to the decentralized models, both the supplier and the manufacturer can obtain higher utilities and provide lower price and greener products in centralized supply chain.Finally, this paper studies the optimal pricing and green innovation decisions of green supply chain in competitive circumstance. Considering a two-tier supply chain structure that consists of one manufacturer and two retailers, this paper analyzes the equilibrium decisions of three different strategies, i.e. manufacturer Stackelberg, retailer Stackelberg and vertical Nash, when the manufacturer conducts green process innovation in order to decrease the produce cost. The equilibrium decisions and equilibrium profits of the three channel structures are compared. Numerical examples are presented to illustrate the effect of some parameters, such as the product substitutability, on equilibrium decisions and equilibrium profits. The results indicate that, the manufacturer and retailers can obtain the highest profit when they are the leader of the supply chain, the Nash game comes second, and they get the lowest profit when they are the follower of the supply chain. In the view of the total supply chain, the total profits of the supply chain are highest when the players play Nash game, and the manufacturer Stackelberg game comes last followed by the retailer Stackelberg game. The numerical example indicates that, the optimal wholesale price, R&D level and the retail price all increase with the product substitutability. Besides, with the product substitutability increases, the manufacturer will take up more percentage of channel profits while the retailers will take up less.The research results above not only enrich and expand the theory of green supply chain management, but also promote the utilization of relative models in practice and provide more theoretical basis and support for the decision-makers.