Green product diffusion: The impacts of asymmetric retailers’ strategic product decisions

Abstract

With the continuous deterioration of the environment and the improvement of consumer green awareness, more and more producers began to launch green products. For example, many automobile companies began to produce new energy vehicles. However, whether a new product can be successfully introduced to the market depends not only on the product’s quality improvement, but also on its sales channels. In this paper, we model a supply chain composed of a manufacturer and two asymmetric retailers to analyze how the retailers’ strategic decisions affect the introduction of a newer green product. Backward induction is adopted to survey the dynamic decisions of the supply chain members. Given the leading retailer’s product choice, the follower-up retailer’s product choices and decision optimums are defined by specific thresholds of consumer green valuation and production costs. Results show that the follower-up retailer would make completely different responses within a same threshold range when the leading retailer takes different product decisions. In other words, even if the leading retailer chooses green new products, the follower will not necessarily imitate the choice of green products, and it could be more advantageous to choose the old generation products (for price competition). Furthermore, results show that green product introduction does not necessarily bring Pareto improvement to both the two retailers. Finally, we derive the specific intervals in which green products can be successfully introduced into the market. Our modelling work and results provide instructive managerial insights on green product introduction in a retailer led supply chain.