Optimal decision-making considering inter-supply-chain competition and negative-spillover from environmental effort

doi:10.1016/j.regsus.2022.11.003

Abstract

Abstract:

Focusing on negative-spillover from environmental effort, this paper explores the issues of competition and optimal decision-making based on two competing two-stage manufacturer-dominated supply chains: centralized and decentralized. We develop the Stackelberg competition models according to four identified competition scenarios (pure centralized structure-CC, mixed structure-DC, mixed structure-CD, and pure decentralized structure-DD). By comparing the results of the four scenarios, we find that negative-spillover from environmental effort negatively impacts environmental-effort providers and reduces the optimal profit of the manufacturer who provide the environmental effort, which in turn reduces the profit of the entire supply chain. The inter-supply-chain competition also produces a negative incentive for environmental-effort providers but provides a free riding effect on the non-provider, and this effect increases as competition increases. In terms of network externality, the structural change of a supply chain from centralized to decentralized is altruistic, which generates a double-marginalization (i.e., the network externality enhances competitor performance). Furthermore, the leader supply chain with a centralized structure is more willing to provide greater environmental effort, whereas when the leader supply chain structure remains unchanged, its environmental effort depends on the negative-spillover effect and the follower supply chain structure. Therefore, excessive supply chain competition should be avoided, and the negative-spillover effect of environmental effort should be reduced to motivate environmental-effort providers to increase their environmental efforts and promote the development of sustainable green supply chains. Future research should examine retailer-dominated supply chain competition and compare the results with the conclusions of this study.

Key words: Supply chain management, Environmental effort Negative-spillover effect, Inter-supply-chain competition, Manufacturer-dominated supply chain, Centralized, Decentralized, Stackelberg game

WANG Jiguang, HU Yushang, WU Yucai. Optimal decision-making considering inter-supply-chain competition and negative-spillover from environmental effort[J]. Regional Sustainability, 2022, 3(4): 319-334.

Figures/Tables 8

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Supply-chain structure		Supply chain 2
Supply-chain structure		Centralized (C)	Decentralized (D)
Supply chain 1	Centralized (C)	CC	CD
Supply chain 1	Decentralized (D)	DC	DD

Variable	Description
a	The total market demand potential.
θ	The degree of inter-supply-chain competition ranging from 0 to 1.
s	The level of environmental effort.
η	The coefficient of environmental effort cost.
k	The coefficient of negative-spillover effect of environmental effort, that is, the degree of an environmental effort by supply chain 1 shrinks the demand of supply chain 2, the range of k is 0-1.
c	The unit manufacturing cost.
f	The unit sales cost.
q_i	The demand for supply chain i.
w_i	The wholesale price of product i.
M_i	The profit of manufacturer i.
R_i	The profit of retailer i.
T_i	The profit of supply chain i.
p_i	The retail price of product i.

Supply chain strucure	(?p₁)/?k	(?p₂)/?k	(?s)/?k	(?w₁)/?k	(?w₂)/?k	(?T₁)/?k	(?T₂)/?k	(?M₁)/?k	(?M₂)/?k	(?R₁)/?k	(?R₂)/?k
CC	-	N	-	\	\	-	N	-	N	\	\
DC	-	N	-	-	\	-	N	-	N	-	\
CD	-	N	-	\	-	-	N	-	N	\	N
DD	-	-	-	-	N	-	N	-	N	-	N

Supply chain sturcture	Variable	k=0.5					k=1.0
Supply chain sturcture	Variable	θ=0.1	θ=0.3	θ=0.5	θ=0.7	θ=0.9	θ=0.1	θ=0.3	θ=0.5	θ=0.7	θ=0.9
CC	p₁	8.77	7.43	6.68	6.18	5.81	8.54	7.10	6.36	5.89	5.54
	p₂	4.44	4.72	4.73	4.66	4.57	3.70	3.93	4.18	4.25	4.23
	s	6.61	5.12	4.29	3.75	3.36	6.24	4.52	3.64	3.09	2.71
	T₁	28.3	24.23	21.85	20.17	18.85	27.33	22.77	20.36	18.75	17.54
	T₂	6.55	9.61	11.19	12.05	12.51	1.33	4.84	7.14	8.57	9.47
DC	p₁	9.32	8.41	7.80	7.34	6.97	9.23	8.26	7.63	7.17	6.81
	p₂	5.42	5.43	5.34	5.21	5.09	4.92	5.09	5.08	5.01	4.92
	s	2.39	2.01	1.77	1.60	1.46	2.30	1.84	1.56	1.37	1.22
	T₁	16.73	15.32	14.32	13.52	12.83	16.44	14.81	13.75	12.95	12.29
	T₂	12.92	15.29	16.71	17.6	18.15	9.38	12.41	14.26	15.46	16.24
CD	p₁	8.82	7.65	7.04	6.65	6.36	8.48	7.18	6.57	6.21	5.95
	p₂	5.67	6.10	6.16	6.10	6.00	3.78	5.04	5.54	5.56	5.55
	s	6.59	5.16	4.41	3.93	3.59	6.04	4.28	3.43	2.91	2.55
	T₁	29.13	26.50	25.20	24.33	23.66	27.70	24.30	22.86	22.02	21.41
	T₂	4.95	7.30	8.64	9.52	10.13	1.16	4.01	5.88	7.12	8.01
DD	p₁	9.45	8.77	8.34	8.02	7.76	9.32	8.53	8.08	7.76	7.51
	p₂	7.14	7.19	7.12	7.01	6.89	6.40	6.71	6.76	6.72	6.65
	s	2.40	2.06	1.85	1.70	1.58	2.27	1.80	1.52	1.33	1.18
	T₁	17.36	16.95	16.70	16.47	16.24	16.92	16.14	15.77	15.51	15.28
	T₂	9.70	11.68	13.12	14.24	16.16	7.11	9.60	11.33	12.63	13.68