Decision Analysis of Manufacturers’ Misreporting Behavior Considering Retailer Corporate Social Responsibility

Under the increasingly competitive environment, some manufacturers may misreport costs to boost their own profits, potentially harming the overall interests of the supply chain. Conversely, some retailers may engage in corporate social responsibility (CSR) to promote sustainable development within the supply chain. Thus, this study considers a competitive supply chain comprising one retailer and two manufacturers, and investigates the impact of the manufacturer’s misreporting behavior on the chain supply members’ pricing decisions and performances as well as the impact of retailer CSR on the manufacturer’s misreporting behavior. When the retailer does not engage in CSR, the manufacturers’ misreporting behavior is solely influenced by misreporting factors. If the misreporting factors of both manufacturers are low, they can always benefit from their misreporting behavior. Interestingly, if one manufacturer has a high misreporting factor while the other has a low one, the manufacturer whose misreport factor is high does not misreport its cost, instead benefiting from the competitor’s misreporting behavior. When the retailer engages in CSR, the manufacturer’s misreporting behavior is influenced not only by their misreporting factors but also by the degree of product substitutability. If product substitutability is low, both manufacturers do not have an incentive to misreport their costs. If product substitutability is moderate and both misreporting factors are low, they can benefit from their misreporting behavior. However, when product substitutability is high, if one manufacturer misreports, the other will refrain from doing so.