Effects of green supplier integration and development in competing supply chains

Abstract This work develops a Cournot game model to study two competing supply chains, each consisting of one manufacturer and one supplier, producing and selling substitutable green products. The manufacturers decide whether to adopt the green supplier integration (GSI) strategy and the green supplier development (GSD) investment level to improve the product greenness degree. The interaction between the GSD decisions and the GSI strategies are analyzed with different manufacturer GSD capacities and market greenness sensitivity. The results indicate that the manufacturer with a higher GSD capacity will always adopt the GSI strategy to maximize GSD investment level or profit, and the manufacturer with a lower GSD capacity decides whether to adopt the GSI strategy by comparing the GSD capacities of the two manufacturers. The game model is extended from dedicated sourcing to diversified sourcing and hybrid sourcing to obtain optimal sourcing options jointly reached by the two manufacturers. Under these extensions, the GSI strategy always leads to higher GSD investment levels, and adopting the GSI strategies by both manufacturers becomes the only Nash equilibrium strategy combination. Manufacturers choose different sourcing options by judging the difference in their GSD capacities under different criteria, and choose hybrid sourcing when their GSD capacity gap is sufficiently large in a weakly competitive market.