Cooperative or Noncooperative? Green Innovation, Pricing Decisions, and Collaborative Mechanisms in a Supply Chain With Manufacturer's Disappointment Aversion

Manufacturers often make their green innovation decisions discreetly, considering the potential disappointment of failing to reach expectations caused by high uncertainty in the process. This article examines manufacturer's disappointment-aversion behavior and incorporates it into a two-echelon green supply chain decision-making framework. We first investigate and analyze a firm's equilibrium strategies with a Wholesale Price contract as a benchmark, and then we propose collaborative mechanisms under either a noncooperative game structure or under a cooperative game structure. The results show that manufacturer's disappointment aversion will reduce its interest in implementing green innovation, and that both types of collaborative mechanisms could realize Pareto improvements. Moreover, our results imply that the contract under a noncooperative structure can offset the negative effect caused by the manufacturer's disappointment-aversion, and the advantage of the contract under a cooperative structure lies in that it can eliminate the “double-marginalization” effect. However, interestingly and counterintuitively, our analysis indicates that we may not get the best results under a cooperative decision-making structure when the green innovation decision-maker is averse to disappointment.