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Sustainability 2016, 8(4), 365; doi:10.3390/su8040365

Supply Chain Coordination and Consumer Awareness for Pollution Reduction

Operations Strategy and Management Science, KAIST Business School, Seoul 02455, Korea
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Academic Editor: Young Hae Lee
Received: 15 March 2016 / Revised: 10 April 2016 / Accepted: 12 April 2016 / Published: 15 April 2016
(This article belongs to the Special Issue Sustainability in Supply Chain Management)
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Abstract

To understand the dynamics of the manufacturer’s effort to reduce pollution in a supply chain consisting of manufacturer, retailer, and consumers, we analyze four cases according to consumer awareness of the pollution’s harmful effect, i.e., environmentally aware versus ignorant, and supply chain coordination, i.e., competitive versus cooperative. Applying differential games, we derive managerial implications: the most significant is that the supply chain coordination strategy becomes irrelevant to reducing the pollution, if the consumers are not environmentally aware or sensitive enough. It highlights the critical role played by the consumer awareness in curbing the pollution in the supply chain. In addition, we find the transfer price and the potential market size are important factors to determine each case’s relative effectiveness. Under a regular condition, where the transfer price from the retailer to the manufacturer is sufficiently high, the consumer-aware and competitive case can generate a better outcome in reducing the pollution than those with ignorant consumers. However, the opposite might occur if the transfer price is excessively low, giving the manufacturer little motivation to make an effort to reduce the pollution. For the cooperative supply chain, it is the potential market size that determines whether the consumer-aware case is better than the consumer-ignorant. In fact, it turns out that there is a stronger result, i.e., the feasibility condition enforces that the market is always big enough to make the consumer-aware cooperative case better than the consumer-ignorant cases. We further discuss managerial as well as policy implications of these analysis outcomes. View Full-Text
Keywords: pollution reduction; supply chain coordination; consumer awareness pollution reduction; supply chain coordination; consumer awareness
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Kim, B.; Sim, J.E. Supply Chain Coordination and Consumer Awareness for Pollution Reduction. Sustainability 2016, 8, 365.

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