A game theoretic approach for the optimal investment decisions of green innovation in a manufacturer-retailer supply chain

Sha Xi, Chulung Lee

Research output: Contribution to journalArticle

7 Citations (Scopus)


With increasing consumers' awareness of eco-friendly products, Manufactures and Retailers are proactive to invest in green innovation. This paper analyzes a single manufacturer, single retailer supply chain where both participants are engaged in green innovation investment. Consumer demand is dependent on selling price and investment level of green innovation. We consider the effects of consumer environmental awareness, perception difficulty of green products, and degree of goods' necessity on decision making. According to the relationship between the manufacturer and the retailer, three non-coordinated game (including Manufacturer-Stackelberg, Retailer-Stackelberg, and Vertical Nash) and one coordinated supply chain structures are proposed. The pricing and investment level of green innovation are investigated under these four supply chain structures, respectively. A Retail Fixed Markup policy is analyzed when channel members fail to achieve supply chain coordination. The effects of RFM on supply chain performance are evaluated. We numerically compare optimal solutions and profits under the coordination, the Manufacturer-Stackelberg, and the Retail Fixed Markup supply chain structure and provide managerial insights for practitioners.

Original languageEnglish
Pages (from-to)147-158
Number of pages12
JournalInternational Journal of Industrial Engineering : Theory Applications and Practice
Issue number1
Publication statusPublished - 2015 Jan 1


  • Consumer environmental awareness
  • Game theory
  • Green supply chain management
  • Product type

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering

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