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External Intervention or Internal Coordination? Incentives to Promote Sustainable Development through Green Supply Chains

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  • Yang Tong

    () (School of Business Administration, South China University of Technology, Guangzhou 510640, China)

  • Yina Li

    () (School of Business Administration, South China University of Technology, Guangzhou 510640, China)

Abstract

To encourage firms to engage in green production, two different types of investment funding, namely external funds from agencies outside the supply chain (e.g., government subsidy), and internal funds from supply chain partners (e.g., greening cost-sharing with the retailer), are investigated in this paper. Based on game theory, the decision-making behavior and profits of a competitive supply chain consisting of a green manufacturer, a regular manufacturer, and a retailer are analyzed under both funding schemes. The results show that while both government subsidy and greening cost-sharing contract can achieve the goals of increasing a product’s degree of greenness and increasing the sales of green products, there are differences between these two methods in reaching these goals. Further, both via theoretical and numerical analysis, we find that although both the green manufacturer and the retailer can greatly benefit from government subsidy and greening cost-sharing contract, they may have different preferences regarding these two methods, which are mainly related to the size of the government subsidy, the fraction of greening cost-sharing with the retailer, the Research and Development (R&D) cost coefficient, the greenness sensitivity coefficient, and price sensitivity coefficient. Finally, the supply chain members’ behaviors (including the production and pricing decisions and, the choice of funds investment) are largely affected by the government subsidy mechanism.

Suggested Citation

  • Yang Tong & Yina Li, 2018. "External Intervention or Internal Coordination? Incentives to Promote Sustainable Development through Green Supply Chains," Sustainability, MDPI, Open Access Journal, vol. 10(8), pages 1-20, August.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:8:p:2857-:d:163286
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    References listed on IDEAS

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    1. Hovelaque, Vincent & Bironneau, Laurent, 2015. "The carbon-constrained EOQ model with carbon emission dependent demand," International Journal of Production Economics, Elsevier, vol. 164(C), pages 285-291.
    2. Zhu, Wenge & He, Yuanjie, 2017. "Green product design in supply chains under competition," European Journal of Operational Research, Elsevier, vol. 258(1), pages 165-180.
    3. S Swami & J Shah, 2013. "Channel coordination in green supply chain management," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(3), pages 336-351, March.
    4. Yujie Xiao & Shuai Yang & Lianmin Zhang & Yong-Hong Kuo, 2016. "Supply Chain Cooperation with Price-Sensitive Demand and Environmental Impacts," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-13, July.
    5. Bowon Kim & Jeong Eun Sim, 2016. "Supply Chain Coordination and Consumer Awareness for Pollution Reduction," Sustainability, MDPI, Open Access Journal, vol. 8(4), pages 1-20, April.
    6. 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.
    7. Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
    8. repec:gam:jsusta:v:8:y:2016:i:4:p:365:d:68273 is not listed on IDEAS
    9. Fahimnia, Behnam & Sarkis, Joseph & Davarzani, Hoda, 2015. "Green supply chain management: A review and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 162(C), pages 101-114.
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    More about this item

    Keywords

    green supply chain; R&D cost; government subsidy; greening cost-sharing contract;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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