Pricing and Quality Investments in a Mixed Brown-Green Product Market

Conference paper
Part of the Lecture Notes in Computer Science book series (LNCS, volume 12433)


Sustainable Supply Chain Management (SSCM) has assumed a position of prominence for academics and industry over the last two decades. The sustainability literature shows that typically manufacturers aim to optimize their pricing and greening level decisions in a mixed (green and brown) consumer market. In this work, we capture a manufacturer’s classic dilemma on the pricing of green and brown products, and greening investments, while subject to budget constraint. We compute and analyze the variations of optimal decisions over time. Our findings underscore the importance of investing in greening technologies and learning for the survival of green products. Furthermore, we show that a manufacturer’s optimal pricing strategy is to enter the market with a lower price for the green product and to increase it over time, eventually, surpassing the price for the brown product. Our analysis reveals that the greening level attraction can nullify the effect of a high price on the green product, resulting in higher green demand than brown. Higher green product demand is a win-win situation for both the manufacturer and the environment.


Green products Pricing Greening level Learning Sustainability Optimal control 


  1. 1.
    Benveniste, A.: Average Americans Can’t Afford to Buy Green (2019).
  2. 2.
    Berger, J.: Signaling can increase consumers’ willingness to pay for green products. Theoretical model and experimental evidence. J. Consum. Behav. 18(3), 233–246 (2019)Google Scholar
  3. 3.
    Brécard, D.: Consumer misperception of eco-labels, green market structure and welfare. J. Regul. Econ. 51(3), 340–364 (2017). Scholar
  4. 4.
    Chen, C.: Design for the environment: a quality-based model for green product development. Manag. Sci. 47(2), 250–263 (2001)CrossRefGoogle Scholar
  5. 5.
    Chen, Y.J., Sheu, J.B.: Environmental-regulation pricing strategies for green supply chain management. Transp. Res. Part E: Logist. Transp. Rev. 45(5), 667–677 (2009)CrossRefGoogle Scholar
  6. 6.
    Cohen, M.A., Cui, S., Gao, F.: The effect of government support on green product design and environmental impact. Available at SSRN 3291017 (2019)Google Scholar
  7. 7.
    Ding, J., Wang, W.: Information sharing in a green supply chain with promotional effort. Kybernetes ahead-of-print (2020)Google Scholar
  8. 8.
    Ghazilla, R.A.R., Sakundarini, N., Abdul-Rashid, S.H., Ayub, N.S., Olugu, E.U., Musa, S.N.: Drivers and barriers analysis for green manufacturing practices in Malaysian SMEs: a preliminary findings. Proc. CIRP 26(1), 658–663 (2015)CrossRefGoogle Scholar
  9. 9.
    Ghosh, D., Shah, J.: Supply chain analysis under green sensitive consumer demand and cost sharing contract. Int. J. Prod. Econ. 164, 319–329 (2015)CrossRefGoogle Scholar
  10. 10.
    Ghosh, D., Shah, J., Swami, S.: Product greening and pricing strategies of firms under green sensitive consumer demand and environmental regulations. Ann. Oper. Res. 290, 491–520 (2018). Scholar
  11. 11.
    Gonzalez, E.D., et al.: Making real progress toward more sustainable societies using decision support models and tools: introduction to the special volume. J. Cleaner Prod. 105, 1–13 (2015)CrossRefGoogle Scholar
  12. 12.
    Li, B., Zhu, M., Jiang, Y., Li, Z.: Pricing policies of a competitive dual-channel green supply chain. J. Clean. Prod. 112, 2029–2042 (2016)CrossRefGoogle Scholar
  13. 13.
    Li, X., Li, Y.: Chain-to-chain competition on product sustainability. J. Clean. Prod. 112, 2058–2065 (2016)CrossRefGoogle Scholar
  14. 14.
    Montoya-Torres, J.R., Gutierrez-Franco, E., Blanco, E.E.: Conceptual framework for measuring carbon footprint in supply chains. Prod. Plan. Control 26(4), 265–279 (2015)Google Scholar
  15. 15.
    Neto, J.Q.F., Bloemhof-Ruwaard, J.M., van Nunen, J.A., van Heck, E.: Designing and evaluating sustainable logistics networks. Int. J. Prod. Econ. 111(2), 195–208 (2008)CrossRefGoogle Scholar
  16. 16.
    Peng, H.: Optimal subsidy policy for accelerating the diffusion of green products. J. Ind. Eng. Manag. (JIEM) 6(2), 626–641 (2013)Google Scholar
  17. 17.
    Solarcity: Solar City Inside Energy. Consumer trends in sustainability: insights to grow your market share and defend your brand (2013).
  18. 18.
    Walley, N., Whitehead, B.: It’s not easy being green. Harvard Bus. Rev. 72(3), 46–52 (1994)Google Scholar
  19. 19.
    Yenipazarli, A., Vakharia, A.: Pricing, market coverage and capacity: can green and brown products co-exist? Eur. J. Oper. Res. 242(1), 304–315 (2015)zbMATHCrossRefGoogle Scholar
  20. 20.
    Yenipazarli, A., Vakharia, A.J.: Green, greener or brown: choosing the right color of the product. Ann. Oper. Res. 250(2), 537–567 (2015). Scholar
  21. 21.
    Zhang, Q., Zhao, Q., Zhao, X.: Manufacturer’s product choice in the presence of environment-conscious consumers: brown product or green product. Int. J. Prod. Res. 57(23), 7423–7438 (2019)CrossRefGoogle Scholar
  22. 22.
    Zhang, Q., Zhao, Q., Zhao, X., Tang, L.: On the introduction of green product to a market with environmentally conscious consumers. Comput. Ind. Eng. 139, 106190 (2020)CrossRefGoogle Scholar
  23. 23.
    Zhou, Y.: The role of green customers under competition: a mixed blessing? J. Clean. Prod. 170, 857–866 (2018)CrossRefGoogle Scholar
  24. 24.
    Zu, Y., Chen, L., Fan, Y.: Research on low-carbon strategies in supply chain with environmental regulations based on differential game. J. Clean. Prod. 177, 527–546 (2018)CrossRefGoogle Scholar

Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.CIRRELT and Département d’informatique et de recherche opérationnelleUniversité de MontréalMontréalCanada

Personalised recommendations