Green investment in a supply chain with manufacturer competition: Pricing and strategy selection

This research delves into green investment, a strategy for manufacturers to attain a competitive advantage, to examine its impact on their competitive decision-making. This study constructs a game-theoretic model to analyze the impact of two competing manufacturers’ choices regarding green investments when selling their products through a common retailer. The analysis is divided into three scenarios: Model N (neither manufacturer makes a green investment), Model S (only one manufacturer makes a green investment), and Model B (both manufacturers make green investments). By deriving and comparing the equilibrium prices and profits for each scenario, the paper reveals that retailers consistently gain advantages from manufacturers’ green investments. However, a manufacturer’s decision to invest in green initiatives is contingent upon multiple factors, including the strategies of its competitors, the efficiency of the green investment, the level of product greenness, and the proportion of customers willing to pay a premium for environmentally friendly products.