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Competing Retailers’ Environmental Investment: An Analysis under Different Power Structures

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  • Xuyue Li

    (School of Management & Engineering, Nanjing University, Nanjing 210093, China)

Abstract

Sustainability issues in supply chains have received increasingly significant concern. Facing incentives such as environmental tax and consumer environmental awareness, firms and even retailers have started to make sustainability investments. To evaluate the retailer’s contribution to sustainability issues, we study a supply chain with one manufacturer and two symmetric competing retailers who have the option to make sustainable investment in their upstream members directly in green technology or clean production. We investigate the optimal sustainable investment and operation decisions under three power structures: (1) firms have the same power (Nash game); (2) the manufacturer is more powerful (Manufacturer-lead Stackelberg game) and (3) the retailers are more powerful (Retailer-lead Stackelberg game). By analyzing the optimal decisions and the economic performances, we show that the retailers always have incentives to make sustainable investment in all power structures. However, the retailers’ power affects firms’ decisions, the economic and the environmental performances. When the investment cost is low, the emission reduction due to investment is the most significant with less powerful retailers. With relatively high investment cost, whether the retailers having more power make more sustainable investment depends on the unit tax saving and effect factor of emission reduction on the demand. From the environmental perspective, simultaneous games may conduct the most significant total emission reduction in most cases. We also consider an asymmetric case and compare it with the symmetric one.

Suggested Citation

  • Xuyue Li, 2018. "Competing Retailers’ Environmental Investment: An Analysis under Different Power Structures," Energies, MDPI, vol. 11(10), pages 1-18, October.
    • Handle: RePEc:gam:jeners:v:11:y:2018:i:10:p:2719-:d:175019
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