Pricing, Green Degree and Coordination Decisions in a Green Supply Chain with Loss Aversion
Round 1
Reviewer 1 Report
The authors consider a two-echelon green supply chain with a manufacturer and a
retailer, where the manufacturer is loss averse and the retailer is risk-neutral. They use
Stackelberg game to investigate the impact of loss aversion and green efficiency coefficient
on the decision variables and on the profits.
It is assumed that manufacturer’s reference point of loss aversion is equal to the subgame
perfect equilibrium partition.
It is shown that in the centralized decision-making setting (CDS) green degree and profit
of the green supply chain are higher than that in the decentralized decision-making setting
(DDS), while in the decentralized decision-making setting with a loss-averse manufacturer
(DDS-LAM) loss aversion of manufacturer further decreases green degree and
profit of green supply chain.
Finally, executing greening cost-share contract can improve chain members’ profits if retailer
shares an appropriate proportion with the loss-averse manufacturer.
The paper addresses an interesting issue which is consistent with the scope of the
journal.
I believe that the paper is worth to be published in this journal according to the following
suggestions.
1. The paper is interesting and the problem here addressed has really many similarities
with the manufacturer-retailer model in which the demand is increased by advertising
rather than the degree of green of the product. Therefore a significant reference
to this literature should be inserted.
2. A considerable effort must be made to improve the readability of the paper. I think
it’s better to move all the proofs in an appendix and to improve the English significantly
by eliminating even the many typos.
Author Response
Response Point 1: A reference on promotion of advertising has been inserted (Please refer to line 215-217), i.e., 43. Yang, L., Wang, G., & Ke, C. (2018). Remanufacturing and promotion in dual-channel supply chains under cap-and-trade regulation. Journal of Cleaner Production, 204, 939-957 (Please refer to line 879-880).
Response Point 2: To improve the readability of the paper, we have made a considerable effort in the revised manuscript and these revisions are marked in red. All the proofs are moved in an appendix, and the English is improved by eliminating the typos.
Author Response File: 
Author Response.docx
Reviewer 2 Report
i. Literature review should be improved. What are the closely related papers in the literature and how does this study contrast? Authors should provide a comparison table with the previous studies to highlight the research gaps and contributions.
ii. Numerical examples should be provided in results analysis section with the physical meaning of the each finding? How these results will help practitioners?
iii. Managerial implications should be provided. How this model can be implemented in real-life? What are benefits of applying the model? What are the theoretical and practical benefits of the model? What are special things practitioners need to consider to apply this model? You need to explain the impact of your research? For example, real-life application, benefit, increase efficiency, reduce loss, efficient decision making and so on. You need write all possible implications of this model.
iv. The physical meanings of the all equations should be provided.
Author Response
Response Point i: Literature review has been improved. A comparison table, which shows the closely related papers and contrast our paper, is provided to highlight the research gaps and contributions. (Please refer to Table 1 and line 183-199).
Response Point ii: Numerical examples have been provided in Numerical analysis section with the physical meaning of the each finding (Please refer to Numerical analysis section). These results help practitioners to make the optimal decisions in the green supply chains. Specifically, First, if the green efficiency coefficient of products is sufficiently low, then the risk-neutral retailer prefers to make a high retail price and the loss-aversion manufacturer sales products at a high wholesale price, since in the green supply chains, market demand depends on retail price and green degree of products and a lower green efficiency coefficient of products cannot result in a significant increase in market demand, which make the risk-neutral retailer and the loss-aversion manufacturer set a high retail price and a high wholesale price to obtain profit, respectively. In addition, if the green efficiency coefficient of products is sufficiently high, then the risk-neutral retailer prefers to make a low retail price and the loss-aversion manufacturer sales products at a low wholesale price, Since a higher level of environmental awareness causes consumers to purchase higher green degree products when the green efficiency coefficient of products is sufficiently high, which results in dramatically increasing market demand. In this case, the risk-neutral retailer sells products at a low, but the risk-neutral retailer obtain a large profit by quick turnover, which which cause the loss-averse manufacturer sales products at a low wholesale price. Second, the loss-aversion manufacturer will make a low green degree, since the manufacturer with loss aversion is not willing to invest in new equipment or technology to produce the green products. (Please refer to line 600-615)
Response point iii: Managerial implications have been provided.
How this model can be implemented in real-life?
Response: This study can be applied to the green supply chain where the manufacturer occupies an absolute dominant position in the green supply chain. For example, the mobile phone industry supply chain, including HUAWEI, APPLE and SAMSUNG.(Please refer to line 588-590)
What are benefits of applying the model?
Response : The model constructed in this paper helps non-rational decision-maker to make the optimal decisions in the green supply chains. In particular, in this paper, the model helps the loss-aversion manufacturer to make the optimal wholesale price decision and the optimal green degree decision. In addition, the model helps the risk-neutral retailer to make the optimal retail price decision. (Please refer to line 590-594)
What are the theoretical and practical benefits of the model?
Response: Our model is of important theoretical and practical significance. On the one hand, this model promotes further theoretical study of green supply chains by considering a two-echelon green supply chain with a manufacturer and a retailer, where the manufacturer is loss averse and the retailer is risk-neutral. On the other hand, this model helps the loss-aversion manufacturer and the risk-neutral retailer to make the optimal decisions in the green supply chains on how to make pricing, green degree and coordination decisions. (Please refer to line 594-600)
What are special things practitioners need to consider to apply this model?
Response : It is worthwhile to note that members of green supply chains have to consider the green efficiency coefficient of products to apply our model, since the green efficiency coefficient of products has an important impact on the optimal wholesale price decision, the optimal green degree decision and the retail price decision. (Please refer to line 619-622)
You need to explain the impact of your research?
Response: This model helps the loss-aversion manufacturer and the risk-neutral retailer to make the optimal decisions in the green supply chains by providing some useful managerial insights on how to make pricing, green degree and coordination decisions. First, if the green efficiency coefficient of products is sufficiently low, then the risk-neutral retailer prefers to make a high retail price and the loss-aversion manufacturer sales products at a high wholesale price, since in the green supply chains, market demand depends on retail price and green degree of products and a lower green efficiency coefficient of products cannot result in a significant increase in market demand, which make the risk-neutral retailer and the loss-aversion manufacturer set a high retail price and a high wholesale price to obtain profit, respectively. In addition, if the green efficiency coefficient of products is sufficiently high, then the risk-neutral retailer prefers to make a low retail price and the loss-aversion manufacturer sales products at a low wholesale price, Since a higher level of environmental awareness causes consumers to purchase higher green degree products when the green efficiency coefficient of products is sufficiently high, which results in dramatically increasing market demand. In this case, the risk-neutral retailer sells products at a low, but the risk-neutral retailer obtain a large profit by quick turnover, which cause the loss-averse manufacturer sales products at a low wholesale price. Second, the loss-aversion manufacturer will make a low green degree, since the manufacturer with loss aversion is not willing to invest in new equipment or technology to produce the green products. Finally, Greening cost-share contract can improve the efficiency of green supply chain if the retailer shares an appropriate proportion of greening cost with the manufacturer. In this case, executing greening cost-share contract can improve the profits of the loss-aversion manufacturer and the risk-neutral retailer, which results in the loss-aversion manufacturer and the risk-neutral retailer preferring to execute greening cost-share contract. (Please refer to line 598-619)
Response Point iv:The physical meanings of the all equations have been provided (Please refer to the descriptions of equations).
Author Response File: Author Response.docx
Round 2
Reviewer 2 Report
This version can be accepted for the publication
