Quality (philosophy)

Marketing

Product (mathematics)

Engineering

Philosophy

Cournot competition

Microeconomics

Product differentiation

Product line

Product proliferation

Economics

Market economy

New product development

Manufacturing engineering

Business

Willingness to pay

Mathematics

Product management

Epistemology

Economic surplus

Supply chain

Welfare

Geometry

Industrial organization

Profit (economics)

International Journal of Production Research

Motivated by the real practices in the circular economy, this paper aims to identify optimal product line design for green and non-green products in terms of quality differentiation. We develop a price and quality driven consumer choice model in a two-echelon supply chain through using a game-theoretical approach. Our study shows that no matter how high or low the product quality difference is, when the consumers’ willingness to pay (WTP) for responsibility is relatively low, a single product line strategy will be prioritised over a two-product line strategy; whereas when the consumers’ WTP for responsibility is relatively high, a two-product line strategy is more desirable. Moreover, we find that enhancing product quality could increase consumer welfare and reduce environmental impact. Only when green and non-green product quality difference is large enough, designing and selling green products is beneficial to consumers, brings the slightest pressure on the environment, and generates the highest social welfare. Furthermore, we extend the model by introducing a simplified contract and find that a simplified contract is not able to increase the manufacturer's profit, but may increase the retailer's profit and consumer surplus as well as generate better performance in environmental protection and social welfare.

Product line design and quality differentiation for green and non-green products in a supply chain