Pricing and Coordination Strategy for Green Supply Chain Under Two Production Modes

Abstract

The purpose of this study is to address the issue of coordination and pricing in a single-period and three-stage green supply chain in which green products and non-green products exist together and can be substituted with each other in the market. We examine the equilibrium results for two production modes, green production mode and hybrid production mode, in the cooperative and non-cooperative game to demonstrate the importance of entering supply chain members in collaboration. Theoretical analysis shows that different production costs lead the manufacturer to decide on different production modes when customers have further evaluations about various types of products. Furthermore, the results indicate that the system's performance in a cooperative game is better than that in a non-cooperative game, implying that supply chain members will respond positively to collaboration as their profit is higher than that under the non-cooperative strategy. The cooperative pricing strategy implemented by the Rubinstein bargaining model can provide the Pareto optimal solution for the supply chain system's profit and members' profits considering different production modes. Finally, the proposed model is applied to a generated numerical example to validate the suggested coordinated pricing strategy's validity and results.