Green product design with competition and fairness concerns in the circular economy era

Abstract

In this paper, we consider green product design in a supply chain consisting of one manufacturer and two retailers, where retailer 1 aims at monetary profit maximisation, and retailer 2 has fairness concern. We consider two kinds of green products: a marginal-intensive green product (MIGP) and a development-intensive green product (DIGP). For the former, the green investment cost depends on the green level and the production quantity; while for the latter, the green investment cost depends on the green level solely. In each case, we investigate the impact of the retailer’s fairness concern by comparing the optimal solutions and supply chain performance with those in the basic models in which all the supply chain members aim at profit maximisation. We find that retailer 2 will set a higher retailing price and earn a smaller market share. Such inferiority increases as retailer 2’s inequity aversion increases or as the substitutability degree of the products offered by the two retailers increases. We also find that retailer 2’s fairness concern will always harm the manufacturer. If an equity outcome is achieved, the supply chain may achieve a better performance; however, if an inequity outcome is attained, the supply chain always performs worse.

Keywords:

• Green product design
• fairness concern
• retailing competition
• circular economy

Acknowledgements

We thank the AE and the three reviewers for their constructive comments. This research was supported in part by the National Natural Science Foundation of China under the grant no. 71871052, 71501037, 71832001, the Fundamental Research Funds for the Central Universities and DHU Distinguished Young Professor Program, and SJSU Central RSCA Grant. This work was also supported by the NSFC/RGC Joint Research Scheme (Grant numbers 71661167009, 3-RAA7).

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental data

Supplemental data for this article can be accessed https://doi.org/10.1080/00207543.2019.1657249.

ORCID

Qingying Li http://orcid.org/0000-0003-2965-6858

Tianqin Shi http://orcid.org/0000-0001-6126-7399

Wen Jiao http://orcid.org/0000-0003-1288-9823

Additional information

Funding

This research was supported in part by the National Natural Science Foundation of China under the grant no. 71871052, 71501037, 71832001, the Fundamental Research Funds for the Central Universities and DHU Distinguished Young Professor Program, and SJSU Central RSCA Grant. This work was also supported by the NSFC/RGC Joint Research Scheme (Grant numbers 71661167009, 3-RAA7).