Supply chain analysis under green sensitive consumer demand and cost sharing contract

Abstract

In this paper, we explore supply chain coordination issues arising out of green supply chain initiatives and explore the impact of cost sharing contract on the key decisions of supply chain players undertaking green initiatives. Our motivation comes from firms conducting pioneering work in the area of carbon footprint reduction in their supply chains through product redesign. Through a game theoretic approach we show how product greening levels, prices and profits are influenced by cost sharing contract within the supply chains. We study two models of cost sharing – one in which the retailer offers a cost sharing contract and the other in which the retailer and manufacturer bargain on the cost sharing contract. We also study the impact of greening costs and consumer sensitivity towards green products. Our key contribution lies in modelling cost sharing contract and analysing its impact on a green supply chain. Our study contributes to the burgeoning field of green supply chains and collaboration between channel partners.