IDEAS home Printed from https://ideas.repec.org/a/spr/operea/v25y2025i1d10.1007_s12351-024-00895-w.html
   My bibliography  Save this article

Contract design for a retailer-dominated supply chain under asymmetric green investment cost information

Author

Listed:
  • Niu Yu

    (Wuhan Textile University
    Key Research Institute of Humanities and Social Sciences in Universities of Hubei Province)

  • Mengni Xiong

    (Wuhan Textile University)

  • Pin Zhou

    (Huazhong Agricultural University
    Huazhong Agricultural University)

  • Qingguo Bai

    (Qufu Normal University)

Abstract

Green supply chain management is an efficient approach in response to the environmental pressure in modern society. Information asymmetry and downstream retailer’s power are two typical features in the green supply chain, which significantly affect green investment efficiency. This study considers a two-echelon supply chain consisting of a dominant retailer who provides contract menus by determining the parameters of wholesale price and the corresponding lump-sum payment and a manufacturer who engages in green manufacturing and withholds the private investment cost information. Using a Stackelberg game framework, we characterize the optimal incentive contract parameters and determine the manufacturer’s equilibrium green investment level under both symmetric and asymmetric information structure. Our results reveal that the investment cost information asymmetry induces the Low-type manufacturer to invest aggressively while deters the manufacturer with high-type cost to make higher green investment. Furthermore, we find that the asymmetric information benefits the retailer when trading with a Low-type cost manufacturer, but hurts the retailer when trading with a High-type cost manufacturer. Finally, we also numerically discuss how the information asymmetry affects consumer surplus and social welfare. We hope that our results could provide valuable insights and suggestions for the manufacturer and retailer with regard to incentive contract design under asymmetry information structure.

Suggested Citation

  • Niu Yu & Mengni Xiong & Pin Zhou & Qingguo Bai, 2025. "Contract design for a retailer-dominated supply chain under asymmetric green investment cost information," Operational Research, Springer, vol. 25(1), pages 1-31, March.
    • Handle: RePEc:spr:operea:v:25:y:2025:i:1:d:10.1007_s12351-024-00895-w
    DOI: 10.1007/s12351-024-00895-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12351-024-00895-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s12351-024-00895-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mandal, Prasenjit & Jain, Tarun, 2021. "Partial outsourcing from a rival: Quality decision under product differentiation and information asymmetry," European Journal of Operational Research, Elsevier, vol. 292(3), pages 886-908.
    2. Davoudi, Zahra & Seifbarghy, Mehdi & Sarkar, Mitali & Sarkar, Biswajit, 2023. "Effect of bargaining on pricing and retailing under a green supply chain management," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    3. Murat Kaya & Özalp Özer, 2009. "Quality risk in outsourcing: Noncontractible product quality and private quality cost information," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(7), pages 669-685, October.
    4. Zhu, Wenge & He, Yuanjie, 2017. "Green product design in supply chains under competition," European Journal of Operational Research, Elsevier, vol. 258(1), pages 165-180.
    5. Jiguang Chen & He Xu & Pin Zhou, 2020. "Delegation vs. direct sourcing revisited: contract types under correlated supply risks and asymmetric cost information," International Journal of Production Research, Taylor & Francis Journals, vol. 58(22), pages 7005-7022, November.
    6. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    7. Chialin Chen, 2001. "Design for the Environment: A Quality-Based Model for Green Product Development," Management Science, INFORMS, vol. 47(2), pages 250-263, February.
    8. Hong, Zhaofu & Guo, Xiaolong, 2019. "Green product supply chain contracts considering environmental responsibilities," Omega, Elsevier, vol. 83(C), pages 155-166.
    9. Li, Zhaolin & Qian, Cheng & Ryan, Jennifer K. & Sun, Daewon, 2022. "Robust mechanism design and production structure for assembly systems with asymmetric cost information," European Journal of Operational Research, Elsevier, vol. 301(2), pages 609-623.
    10. Subrata Saha & Zbigniew Banaszak & Grzegorz Bocewicz & Izabela Ewa Nielsen, 2022. "Pricing and quality competition for substitutable green products with a common retailer," Operational Research, Springer, vol. 22(4), pages 3713-3746, September.
    11. Bai, Qingguo & Chen, Mingyuan & Xu, Lei, 2017. "Revenue and promotional cost-sharing contract versus two-part tariff contract in coordinating sustainable supply chain systems with deteriorating items," International Journal of Production Economics, Elsevier, vol. 187(C), pages 85-101.
    12. Marchi, B. & Zanoni, S. & Zavanella, L.E. & Jaber, M.Y., 2019. "Supply chain models with greenhouse gases emissions, energy usage, imperfect process under different coordination decisions," International Journal of Production Economics, Elsevier, vol. 211(C), pages 145-153.
    13. Sang-Hyun Kim & Serguei Netessine, 2013. "Collaborative Cost Reduction and Component Procurement Under Information Asymmetry," Management Science, INFORMS, vol. 59(1), pages 189-206, November.
    14. Zhaofu Hong & Hao Wang & Yeming Gong, 2019. "Green product design considering functional-product reference," Post-Print hal-02312293, HAL.
    15. He, Ping & Wang, Zheng & Shi, Victor & Liao, Yi, 2021. "The direct and cross effects in a supply chain with consumers sensitive to both carbon emissions and delivery time," European Journal of Operational Research, Elsevier, vol. 292(1), pages 172-183.
    16. Dash Wu, Desheng & Yang, Lipo & Olson, David L., 2019. "Green supply chain management under capital constraint," International Journal of Production Economics, Elsevier, vol. 215(C), pages 3-10.
    17. Elizabeth J. Durango‐Cohen & Liad Wagman, 2014. "Strategic obfuscation of production capacities," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(3), pages 244-267, April.
    18. Weixin Shang & Albert Y. Ha & Shilu Tong, 2016. "Information Sharing in a Supply Chain with a Common Retailer," Management Science, INFORMS, vol. 62(1), pages 245-263, January.
    19. Hong, Zhaofu & Wang, Hao & Gong, Yeming, 2019. "Green product design considering functional-product reference," International Journal of Production Economics, Elsevier, vol. 210(C), pages 155-168.
    20. Li, Guo & Wu, Huamin & Sethi, Suresh P. & Zhang, Xiang, 2021. "Contracting green product supply chains considering marketing efforts in the circular economy era," International Journal of Production Economics, Elsevier, vol. 234(C).
    21. Ma, Peng & Wang, Haiyan & Shang, Jennifer, 2013. "Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts," International Journal of Production Economics, Elsevier, vol. 146(2), pages 745-755.
    22. Yuyan Wang & Runjie Fan & Liang Shen & Mingzhou Jin, 2020. "Decisions and coordination of green e-commerce supply chain considering green manufacturer's fairness concerns," International Journal of Production Research, Taylor & Francis Journals, vol. 58(24), pages 7471-7489, December.
    23. David F. Drake & Paul R. Kleindorfer & Luk N. Van Wassenhove, 2016. "Technology Choice and Capacity Portfolios under Emissions Regulation," Production and Operations Management, Production and Operations Management Society, vol. 25(6), pages 1006-1025, June.
    24. Sarkis, Joseph & Zhu, Qinghua & Lai, Kee-hung, 2011. "An organizational theoretic review of green supply chain management literature," International Journal of Production Economics, Elsevier, vol. 130(1), pages 1-15, March.
    25. Bonney, Maurice & Jaber, Mohamad Y., 2011. "Environmentally responsible inventory models: Non-classical models for a non-classical era," International Journal of Production Economics, Elsevier, vol. 133(1), pages 43-53, September.
    26. Qingying Li & Xiaotong Guan & Tianqin Shi & Wen Jiao, 2020. "Green product design with competition and fairness concerns in the circular economy era," International Journal of Production Research, Taylor & Francis Journals, vol. 58(1), pages 165-179, January.
    27. Hau-Ling Chan & Bin Shen & Yajun Cai, 2018. "Quick response strategy with cleaner technology in a supply chain: coordination and win-win situation analysis," International Journal of Production Research, Taylor & Francis Journals, vol. 56(10), pages 3397-3408, May.
    28. Xia, Qiu & Zhi, Bangdong & Wang, Xiaojun, 2021. "The role of cross-shareholding in the green supply chain: Green contribution, power structure and coordination," International Journal of Production Economics, Elsevier, vol. 234(C).
    29. Jun Wang & Qian Zhang & Xinman Lu & Rui Ma & Baoqin Yu & Huming Gao, 2022. "Emission reduction and coordination of a dynamic supply chain with green reputation," Operational Research, Springer, vol. 22(4), pages 3945-3988, September.
    30. Qing Ye & Izak Duenyas & Roman Kapuscinski, 2013. "Should competing firms reveal their capacity?," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(1), pages 64-86, February.
    31. Zhibin (Ben) Yang & Göker Ayd{i}n & Volodymyr Babich & Damian R. Beil, 2009. "Supply Disruptions, Asymmetric Information, and a Backup Production Option," Management Science, INFORMS, vol. 55(2), pages 192-209, February.
    32. Xu, He & Shi, Ning & Ma, Shi-hua & Lai, Kin Keung, 2010. "Contracting with an urgent supplier under cost information asymmetry," European Journal of Operational Research, Elsevier, vol. 206(2), pages 374-383, October.
    33. Ghosh, Debabrata & Shah, Janat, 2015. "Supply chain analysis under green sensitive consumer demand and cost sharing contract," International Journal of Production Economics, Elsevier, vol. 164(C), pages 319-329.
    34. Chirantan Mondal & Bibhas C. Giri, 2022. "Retailers’ competition and cooperation in a closed-loop green supply chain under governmental intervention and cap-and-trade policy," Operational Research, Springer, vol. 22(2), pages 859-894, April.
    35. Rosa Maria Dangelico, 2017. "What Drives Green Product Development and How do Different Antecedents Affect Market Performance? A Survey of Italian Companies with Eco‐Labels," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1144-1161, December.
    36. Maryam Shoaeinaeini & Kannan Govindan & Donya Rahmani, 2022. "Pricing policy in green supply chain design: the impact of consumer environmental awareness and green subsidies," Operational Research, Springer, vol. 22(4), pages 3989-4028, September.
    37. Fei Lv, 2020. "The Impacts of Channel Structure and Information on an OEM’s Procurement Strategy," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(03), pages 1-34, April.
    38. Guo, Shu & Choi, Tsan-Ming & Shen, Bin, 2020. "Green product development under competition: A study of the fashion apparel industry," European Journal of Operational Research, Elsevier, vol. 280(2), pages 523-538.
    39. Man Yang & Tao Zhang, 2023. "Demand forecasting and information sharing of a green supply chain considering data company," Journal of Combinatorial Optimization, Springer, vol. 45(5), pages 1-28, July.
    40. Zhang, Jianxiong & Li, Sa & Zhang, Shichen & Dai, Rui, 2019. "Manufacturer encroachment with quality decision under asymmetric demand information," European Journal of Operational Research, Elsevier, vol. 273(1), pages 217-236.
    41. Lusheng Shao & Xiaole Wu & Fuqiang Zhang, 2020. "Sourcing Competition under Cost Uncertainty and Information Asymmetry," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 447-461, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hafezi, Maryam & Zhao, Xuan & Zolfagharinia, Hossein, 2023. "Together we stand? Co-opetition for the development of green products," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1417-1438.
    2. Wang, Min & Huang, Hongfu & Liu, Feng, 2023. "To adapt or to standardize? Cross-market green product design under parallel importation impact," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    3. Kelei Xue & Guohua Sun & Yuyan Wang & Shuiye Niu, 2021. "Optimal Pricing and Green Product Design Strategies in a Sustainable Supply Chain Considering Government Subsidy and Different Channel Power Structures," Sustainability, MDPI, vol. 13(22), pages 1-26, November.
    4. Li, Guo & Wu, Huamin & Sethi, Suresh P. & Zhang, Xiang, 2021. "Contracting green product supply chains considering marketing efforts in the circular economy era," International Journal of Production Economics, Elsevier, vol. 234(C).
    5. Svenja Damberg & Ulla A. Saari & Morgane Fritz & Vytaute Dlugoborskyte & Katerina Božič, 2024. "Consumers' purchase behavior of Cradle to Cradle Certified® products—The role of trust and supply chain transparency," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 8280-8299, December.
    6. Kelei Xue & Guohua Sun & Tongtong Yao, 2022. "Incentive Mechanisms for Carbon Emission Abatement Considering Consumers’ Low-Carbon Awareness under Cap-and-Trade Regulation," IJERPH, MDPI, vol. 19(7), pages 1-27, March.
    7. Zhang, Ranran & Ma, Weimin & Si, Hongyun & Liu, Jinjin & Liao, Le, 2021. "Cooperative game analysis of coordination mechanisms under fairness concerns of a green retailer," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    8. Cai, Jianhu & Sun, Haining & Shang, Jennifer & Hegde, Gajanan G., 2023. "Information structure selection in a green supply chain: Impacts of wholesale price and greenness level," European Journal of Operational Research, Elsevier, vol. 306(1), pages 34-46.
    9. Huang, Shuai & Cheng, Jian & Zheng, Wenxin, 2024. "The impacts of environmental benefit concern of enterprises on competitive supply chain economic and environmental benefits," Applied Energy, Elsevier, vol. 374(C).
    10. Yan Zhang & Wen Zhang, 2023. "Optimal pricing and greening decisions in a supply chain when considering market segmentation," Annals of Operations Research, Springer, vol. 324(1), pages 93-130, May.
    11. Fan, Jianchang & Ni, Debing & Fang, Xiang, 2020. "Liability cost sharing, product quality choice, and coordination in two-echelon supply chains," European Journal of Operational Research, Elsevier, vol. 284(2), pages 514-537.
    12. Zolfagharinia, Hossein & Zangiabadi, Maryam & Hafezi, Maryam, 2023. "How much is enough? Government subsidies in supporting green product development," European Journal of Operational Research, Elsevier, vol. 309(3), pages 1316-1333.
    13. Niu, Baozhuang & Xu, Haotao & Mu, Zihao, 2024. "To divide or not to divide: Impact of carbon market connections on firms’ resilient profitability and emission reduction," International Journal of Production Economics, Elsevier, vol. 270(C).
    14. Lai, Zhixuan & Lou, Gaoxiang & Ma, Haicheng & Chung, Sai-Ho & Wen, Xin & Fan, Tijun, 2022. "Optimal green supply chain financing strategy: Internal collaborative financing and external investments," International Journal of Production Economics, Elsevier, vol. 253(C).
    15. Zongyu Mu & Yuangang Zheng & Hao Sun, 2021. "Cooperative Green Technology Innovation of an E-Commerce Sales Channel in a Two-Stage Supply Chain," Sustainability, MDPI, vol. 13(13), pages 1-28, July.
    16. Li, Jin & Hu, Zening & Shi, Victor & Wang, Qian, 2021. "Manufacturer's encroachment strategy with substitutable green products," International Journal of Production Economics, Elsevier, vol. 235(C).
    17. Hong, Zhaofu & Li, Mengfan & Han, Xiaoya & He, Xuhuai, 2020. "Innovative green product diffusion through word of mouth," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 134(C).
    18. Doo-Ho Lee & Jong-Chul Yoon, 2022. "Decisions on Pricing, Sustainability Effort, and Carbon Cap under Wholesale Price and Cost-Sharing Contracts," Sustainability, MDPI, vol. 14(8), pages 1-21, April.
    19. Chenbo Zhu & Juntian Yue & Jing Chen, 2022. "Green Product Development and Order Strategies for Retailers," Sustainability, MDPI, vol. 14(15), pages 1-18, August.
    20. Asgari, Erfan & Hammami, Ramzi & Frein, Yannick & Nouira, Imen, 2021. "The effect of greenness- and price-based competition on a product's environmental performance," International Journal of Production Economics, Elsevier, vol. 234(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:operea:v:25:y:2025:i:1:d:10.1007_s12351-024-00895-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.