Pricing and determining product greenness level in competing supply chains under government intervention

This study examines the pricing and product greenness level determining policies in two competing supply chains. Each supply chain consists of one manufacturer and one retailer, in which the manufacturer produces a green product, and the retailer delivers it to the end consumer. The manufactured products in supply chains are substitutable. This problem is considered in two scenarios: either the manufacturer or the retailer leads the market. In both cases, the government, as a powerful party, can affect the market by establishing a subsidy/punishment system. This system sets a threshold for the product greenness level and punishes or supports the manufacturer accordingly. In this research, we present the manufacturer and retailer profit functions, taking advantage of wholesale and retail prices, the amount of subsidy and punishment, and demand functions. Next, we use a game-theoretic approach to provide the equilibrium wholesale and retail prices and the equilibrium greenness levels. Numerical results show that the retailer-Stackelberg structure provides better conditions for the supply chain members and the environment, and it is even more highlighted with the competition intensity between the members.