Impacts of altruistic preferences on green innovation in a supply chain under uncertainty

Abstract This study develops game‐theory models of a dyadic supply chain with altruistic preferences to study a manufacturer's investment strategy under uncertainty. We consider four scenarios‐retailer‐led and manufacturer‐led, and with and without altruistic preferences to study the effect of altruistic preferences and innovation uncertainty on decisions and profits. The following conclusions were drawn. First, altruistic preferences do not necessarily hurt the profits of members who adopt such behavior. Instead, the retailer's altruistic preferences are potentially beneficial to all members. Second, rather than benefiting the manufacturer, a high probability of innovation success (PIS) may harm profits. Third, the manufacturer may profit from innovation only if the PIS is above a certain threshold, whereas the retailer's altruistic preferences negatively affect this threshold. Finally, we found that, in the supply chain, having more power does not ensure higher profits when considering altruistic preferences.