Game-Theoretic Analysis of Green Supply Chain Under Cost-Sharing Contract with Fairness Concerns

This study investigates the fairness concerned behavior of the supply chain members in a dyadic supply chain with one manufacturer and one retailer, wherein the manufacturer puts efforts for improving the product’s greening level and sells it to the customers through the retailer. Through manufacturer-led and retailer-led Stackelberg game frameworks, the study presents two models- one in which only the manufacturer exhibits advantageous inequity averse behavior and the other in which only the retailer exhibits them. The results demonstrate the following findings: (1) the manufacturer’s profit is decreasing while product’s greening level, retailer’s and total supply chain’s profits are increasing and manufacturer’s wholesale price and retailer’s market price are nonmonotone in manufacturer’s fairness concern, (2) the wholesale price, product’s greening level, manufacturer’s profit, and total supply chain’s profit are increasing while retailer’s profit is decreasing and market price is nonmonotone in retailer’s fairness concern. In addition, the study examines the optimality of cost-sharing contract for different ranges of the model parameters. Furthermore, the findings are elucidated through the numerical analysis and managerial insights are generated.