Balancing price and quality decisions of the environmental supply chain in the presence of socially responsible consumer

Abstract

Given the increasing concerns about energy consumption and rising consumer social responsibility, firms producing brown products should consider transitioning to greener alternatives that are less harmful to the environment. To examine this, we employ a Stackelberg model to analyze the price and quality of brown and green products (e.g., gasoline and electric vehicles) across three product-line strategies: producing only brown products, producing only green products, and producing both. Our study reveals that the quality of brown products in a single product line is the highest among all strategies. In terms of wholesale and retail prices, green products are priced higher than brown products, and prices for both products in a single product line exceed those in a dual product line. Interestingly, manufacturers prefer a dual product line strategy, while retailers favor selling brown products. Additionally, selling only brown products can result in higher consumer surplus, whereas producing only green products may lead to the lowest environmental impact.