Willingness-to-cede behaviour in sustainable supply chain coordination

Willingness-to-cede (WTC) profit behaviours for the purpose of effective cooperation have increasingly emerged as a best practice in competitive supply chain environments; however, this has been complicated by sustainability issues. Inspired by this fact, we study normative prescriptions and models that can be used to coordinate sustainable supply chains considering supply chain leaders' WTC behaviour. Along this line, we adopt a multi-methodological approach and carry out a two-stage analysis of a three-player duopoly supply chain (SDSC) with a leader (i.e., the focal firm) and two competitive followers who provide sustainable products or services. In the first stage, we adopt a non-cooperative game to characterize the interactions within five non-cooperative and cooperative models. In the second stage, to coordinate the SDSC, we first derive the characteristic functions from the equilibrium results of the five models and then revise the classical equal allocation of the non-separable contribution (EANSC) value by incorporating the leader's WTC behavioural parameter. This revised EANSC value serves as a novel solution and thereby enhances the scientific value of the cooperative game theoretical approach. Analytical and numerical studies show that under conditions in which the leader has power and is willing to cede, the optimal coordinated solutions can be obtained when both sustainability competition and the WTC are at a low level; leaders are not willing to cede profits if sustainability competition is high due to product substitutability between two followers. This research illustrates how behavioural theory and non-cooperative and cooperative game theory can be sufficiently modified and adopted to advance supply chain-level cooperation for sustainability. We further carry out a survey and interviews to provide empirical evidence to support our findings.