Dynamic pricing and advertising in a supply chain with environment- and fairness-concerned consumers

The objective of this paper is to assess the impact of disclosing environmental information and price fairness on the strategies and outcomes of a supply chain in a dynamic framework. The relevance of our work stems from the ample empirical evidence that consumers are indeed sensitive to the green reputation of a manufacturer and perceive a transaction gain (loss) when the price is below (higher) than their mental reference point. We model the supply chain as a differential game à la Stackelberg, with the manufacturer being the leader and the retailer the follower. We characterize and compare the equilibrium results for wholesale-price and revenue-sharing contracts. In particular, we check under what conditions, if any, a revenue-sharing contract can be better than a wholesale-price contract for all involved parties, that is, the supply chain members, the consumers, and the environment.