Document Type

Article

Publication Date

Winter 2010

Publication Title

European Journal of Operational Research

Volume

207

Issue

3

First Page

1269

Last Page

1279

DOI

10.1016/j.ejor.2010.06.026

Keywords

Supply chain management, Corporate social responsibility, Wholesale price contracts, Equilibrium

Abstract

Corporate social responsibility (CSR) is considered in a two-echelon supply chain consisting of an upstream supplier and a downstream firm that are bound by a wholesale price contract. CSR performance (the outcome of CSR conduct) of the whole supply chain is gauged by a global variable and the associated cost of achieving this CSR performance is only incurred by the supplier with an expectation of being shared with the downstream firm via the wholesale price contract. As such, the key issue is to determine who should be allocated as the responsibility holder with the right of offering the contract and how this right should be appropriately restricted. Game-theoretical analyses are carried out on six games, resulting from different interaction schemes between the supplier and the firm, to derive their corresponding equilibriums. Comparative institutional analyses are then conducted to determine the optimal social responsibility allocation based on both economic and CSR performance criteria. Main results are furnished in a series of propositions and their implications to the real-world business practice are discussed. The key findings are threefold: under the current model settings: (1) the optimal allocation scheme is to assign the supplier as the responsibility holder with appropriate restrictions on the corresponding rights to determine the wholesale price; (2) inherent conflict exists between the economic and CSR performance criteria and, hence, the two maxima cannot be achieved simultaneously; and (3) although integrative channel profit is not attainable, the system-wide profit will be improved by implementing optimal social responsibility allocation schemes.

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research, 207, 3 (2010) http://dx.doi.org/10.1016/j.ejor.2010.06.026.

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