Retailing Competition for Substitutable Products in Greenness- and Price- Dependent Market
Résumé
We consider two retailers that offer two substitutable products and compete in greennessand price-sensitive market. One retailer offers a product that is produced abroad and the other one offers a product that is produced locally. The local product is greener (releases less carbon emission) than abroad product. The demand function is decreasing in price and carbon emission’s level of product. Since the products are substitutable, the price and carbon emission level of each product affect the other product’s demand. The first retailer decides its product’s price and stock level. The second retailer decides its product’s greenness level, price and stock level. An analytical approach is used in order to solve the model. By using the Nash equilibrium, we find the best strategy for both retailers. We show how the market’s structures affect the strategy of each retailer.