Coordinating a two-echelon supply chain with environmentally aware consumers

Abstract

A two-layer supply chain with a single manufacturer and a single retailer is studied in the context of the consumers' environmental awareness. We aim at determining joint pricing and the environmentally-friendliness level of a product under a deterministic demand pattern. Models under both linear and iso-elastic demand patterns have been studied. A centralized system is studied as the benchmark case. The popular price-only contract is studied, assuming the manufacturer to be the Stackelberg leader, and a wholesale-price-discount contract is developed on the decentralized system to coordinate the chain. The outcome of the proposed model is further illustrated through a numerical example.

Keywords::

• supply chain
• channel coordination
• wholesale-price-discount
• price dependent demand
• environmental awareness

JEL Classification::

• C61
• C71
• L81
• Q56

Acknowledgements

The authors are very thankful to the anonymous referees for their comments and suggestions, which have improved the quality of the paper.

Additional information

Funding

This work was supported by the University Grants Commission, India [grant number 20-6/2009(i)EU-IV].