IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v103y2017icp248-260.html
   My bibliography  Save this article

Non-differentiated green product positioning: Roles of uncertainty and rationality

Author

Listed:
  • Chen, Yenming J.
  • Sheu, Jiuh-Biing

Abstract

This study examines the effect of market uncertainty and consumer rationality on product strategy when a company evaluates its entry into the green market. The risk in launching a green product is high because consumers may not be as environmentally conscious as they claim to be. This study develops a composite condition consisting of preference uncertainty, loss aversion, investment cost, and competition intensity to guide companies to react either conservatively or aggressively. An upgraded non-differentiation strategy is suggested for heterogeneous markets, loss-averse consumers, or high-quality reference when the indicator falls within the greenness range. Unlike conventional competitive analysis for non-green products, differentiation may not always be the best option to benefit the entire society and non-differentiation to green is favorable in the context of our analysis.

Suggested Citation

  • Chen, Yenming J. & Sheu, Jiuh-Biing, 2017. "Non-differentiated green product positioning: Roles of uncertainty and rationality," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 103(C), pages 248-260.
    • Handle: RePEc:eee:transe:v:103:y:2017:i:c:p:248-260
    DOI: 10.1016/j.tre.2017.05.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554516307141
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2017.05.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126.
    2. Teck-Hua Ho & Noah Lim & Tony Haitao Cui, 2010. "Reference Dependence in Multilocation Newsvendor Models: A Structural Analysis," Management Science, INFORMS, vol. 56(11), pages 1891-1910, November.
    3. Ma, Shanshan & Lin, Jie & Zhao, Xuan, 2016. "Online store discount strategy in the presence of consumer loss aversion," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 1-7.
    4. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    5. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    6. Yong Liu & Daniel S. Putler & Charles B. Weinberg, 2004. "Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters," Marketing Science, INFORMS, vol. 23(1), pages 120-133, July.
    7. Javad Nasiry & Ioana Popescu, 2012. "Advance Selling When Consumers Regret," Management Science, INFORMS, vol. 58(6), pages 1160-1177, June.
    8. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
    9. Botond Kőszegi & Paul Heidhues, 2008. "Competition and Price Variation When Consumers Are Loss Averse," American Economic Review, American Economic Association, vol. 98(4), pages 1245-1268, September.
    10. Chen, Yenming J. & Sheu, Jiuh-Biing, 2009. "Environmental-regulation pricing strategies for green supply chain management," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(5), pages 667-677, September.
    11. Charles J. Corbett & Deming Zhou & Christopher S. Tang, 2004. "Designing Supply Contracts: Contract Type and Information Asymmetry," Management Science, INFORMS, vol. 50(4), pages 550-559, April.
    12. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    13. Kristianto, Yohanes & Helo, Petri, 2014. "Product architecture modularity implications for operations economy of green supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 128-145.
    14. Baldwin, Carliss & Hienerth, Christoph & von Hippel, Eric, 2006. "How user innovations become commercial products: A theoretical investigation and case study," Research Policy, Elsevier, vol. 35(9), pages 1291-1313, November.
    15. Giorgos Papagiannakis & Irini Voudouris & Spyros Lioukas, 2014. "The Road to Sustainability: Exploring the Process of Corporate Environmental Strategy Over Time," Business Strategy and the Environment, Wiley Blackwell, vol. 23(4), pages 254-271, May.
    16. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    17. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    18. Shilony, Yuval, 1981. "Hotelling's competition with general customer distributions," Economics Letters, Elsevier, vol. 8(1), pages 39-45.
    19. Sheu, Jiuh-Biing, 2014. "Airline ambidextrous competition under an emissions trading scheme – A reference-dependent behavioral perspective," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 115-145.
    20. Rezapour, Shabnam & Hassani, Ashkan & Farahani, Reza Zanjirani, 2015. "Concurrent design of product family and supply chain network considering quality and price," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 81(C), pages 18-35.
    21. Liu, Wei & Song, Shiji & Wu, Cheng, 2013. "Impact of loss aversion on the newsvendor game with product substitution," International Journal of Production Economics, Elsevier, vol. 141(1), pages 352-359.
    22. Scott Fay & Jinhong Xie, 2008. "Probabilistic Goods: A Creative Way of Selling Products and Services," Marketing Science, INFORMS, vol. 27(4), pages 674-690, 07-08.
    23. Wang, Charles X., 2010. "The loss-averse newsvendor game," International Journal of Production Economics, Elsevier, vol. 124(2), pages 448-452, April.
    24. Deng, Xiaoxue & Xie, Jinxing & Xiong, Huachun, 2013. "Manufacturer–retailer contracting with asymmetric information on retailer's degree of loss aversion," International Journal of Production Economics, Elsevier, vol. 142(2), pages 372-380.
    25. Sheu, Jiuh-Biing & Chen, Yenming J., 2012. "Impact of government financial intervention on competition among green supply chains," International Journal of Production Economics, Elsevier, vol. 138(1), pages 201-213.
    26. Baron, Jonathan & Ritov, Ilana, 1994. "Reference Points and Omission Bias," Organizational Behavior and Human Decision Processes, Elsevier, vol. 59(3), pages 475-498, September.
    27. Christian Terwiesch & Z. Justin Ren & Teck H. Ho & Morris A. Cohen, 2005. "An Empirical Analysis of Forecast Sharing in the Semiconductor Equipment Supply Chain," Management Science, INFORMS, vol. 51(2), pages 208-220, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wei, Liqun & Zhang, Jianxiong & Dai, Rui & Zhu, Guowei, 2019. "Green flexible vs. inflexible capacity strategies for duopoly," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 247-267.
    2. Yan, Nina & Liu, Yang & Xu, Xun & He, Xiuli, 2020. "Strategic dual-channel pricing games with e-retailer finance," European Journal of Operational Research, Elsevier, vol. 283(1), pages 138-151.
    3. Wang, Min & Huang, Hongfu & Liu, Feng, 2023. "To adapt or to standardize? Cross-market green product design under parallel importation impact," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    4. Dong, Ciwei & Liu, Qingyu & Shen, Bin, 2019. "To be or not to be green? Strategic investment for green product development in a supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 193-227.
    5. Ciwei Dong & Qingying Li & Bin Shen & Xun Tong, 2019. "Sustainability in Supply Chains with Behavioral Concerns," Sustainability, MDPI, vol. 11(15), pages 1-7, July.
    6. Zhou, Yan & Chan, Chi Kin & Wong, Kar Hung, 2018. "A multi-period supply chain network equilibrium model considering retailers’ uncertain demands and dynamic loss-averse behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 51-76.
    7. Wei, Ying & Xiong, Sijia & Li, Feng, 2019. "Ordering bias with two reference profits: Exogenous benchmark and minimum requirement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 229-250.
    8. Ihwan Ghazali & Salwa Hanim Abdul-Rashid & Siti Zawiah Md Dawal & Nurul Huda & Amir Husni Mohd Shariff & Safarudin Gazali Herawan & Fu Haw Ho & Novita Sakundarini, 2021. "Guidelines for Designing Green Products Considering Customers’ Cultural Preferences," Sustainability, MDPI, vol. 13(2), pages 1-27, January.
    9. Liu, Chao & Chen, Weidong, 2019. "Decision making in green supply chains under the impact of the stochastic and multiple-variable dependent reference point," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 443-469.
    10. Junbin Wang & Xuan Gao & Zhiguo Wang, 2021. "Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition," Sustainability, MDPI, vol. 13(8), pages 1-23, April.
    11. Qingfeng Meng & Hongming Zhu & Zhen Li & Jianguo Du & Xiangyu Wang & Mi Jeong Kim, 2018. "How Green Building Product Decisions from Customers Can Be Transitioned to Manufacturers: An Agent-Based Model," Sustainability, MDPI, vol. 10(11), pages 1-16, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Helen Bao & Chunming Meng, 2017. "Loss Aversion and Residential Property Development Decisions in China: A Semi-Parametric Estimation," ERES eres2017_156, European Real Estate Society (ERES).
    2. Bao, Helen X. H. & Meng, Charlotte Chunming, 2017. "Loss Aversion and Residential Property Development Decisions in the People’s Republic of China: A Semi-Parametric Estimation," ADBI Working Papers 640, Asian Development Bank Institute.
    3. Wentao Yi & Zhongwei Feng & Chunqiao Tan & Yuzhong Yang, 2021. "Green Supply Chain Management with Nash Bargaining Loss-Averse Reference Dependence," Mathematics, MDPI, vol. 9(24), pages 1-26, December.
    4. Opher Baron & Ming Hu & Sami Najafi-Asadolahi & Qu Qian, 2015. "Newsvendor Selling to Loss-Averse Consumers with Stochastic Reference Points," Manufacturing & Service Operations Management, INFORMS, vol. 17(4), pages 456-469, October.
    5. Zhenyu Hu & Javad Nasiry, 2018. "Are Markets with Loss-Averse Consumers More Sensitive to Losses?," Management Science, INFORMS, vol. 64(3), pages 1384-1395, March.
    6. Schäfers, Sebastian, 2022. "Product Lotteries and Loss Aversion," Working papers 2022/06, Faculty of Business and Economics - University of Basel.
    7. Karle, Heiko & Schumacher, Heiner & Vølund, Rune, 2023. "Consumer loss aversion and scale-dependent psychological switching costs," Games and Economic Behavior, Elsevier, vol. 138(C), pages 214-237.
    8. Carter, Steven & McBride, Michael, 2013. "Experienced utility versus decision utility: Putting the ‘S’ in satisfaction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 42(C), pages 13-23.
    9. Che-Yuan Liang, 2017. "Optimal inequality behind the veil of ignorance," Theory and Decision, Springer, vol. 83(3), pages 431-455, October.
    10. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    11. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    12. repec:dgr:rugsom:14022-eef is not listed on IDEAS
    13. Dorian Jullien, 2018. "Under Risk, Over Time, Regarding Other People: Language and Rationality within Three Dimensions," Research in the History of Economic Thought and Methodology, in: Including a Symposium on Latin American Monetary Thought: Two Centuries in Search of Originality, volume 36, pages 119-155, Emerald Group Publishing Limited.
    14. Heiko Karle & Heiner Schumacher & Rune Vølund, 2020. "Consumer search and the uncertainty effect," Working Papers of Department of Economics, Leuven 657766, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    15. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    16. Ralf Elbert & Lowis Seikowsky, 2017. "The influences of behavioral biases, barriers and facilitators on the willingness of forwarders’ decision makers to modal shift from unimodal road freight transport to intermodal road–rail freight tra," Journal of Business Economics, Springer, vol. 87(8), pages 1083-1123, November.
    17. Aurélien Baillon & Han Bleichrodt & Vitalie Spinu, 2020. "Searching for the Reference Point," Management Science, INFORMS, vol. 66(1), pages 93-112, January.
    18. Campbell Pryor & Amy Perfors & Piers D. L. Howe, 2018. "Reversing the endowment effect," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 13(3), pages 275-286, May.
    19. Wenhui Zhou & Dongmei Wang & Weixiang Huang & Pengfei Guo, 2021. "To Pool or Not to Pool? The Effect of Loss Aversion on Queue Configurations," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 4258-4272, November.
    20. Piccolo, Salvatore & Pignataro, Aldo, 2018. "Consumer loss aversion, product experimentation and tacit collusion," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 49-77.
    21. Daniel Gottlieb & Olivia S. Mitchell, 2020. "Narrow Framing and Long‐Term Care Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 861-893, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:103:y:2017:i:c:p:248-260. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.