Hybrid Market with Product Competition: How Should a Green Product Survive?

In this study, we focus on the design for the environment practice where manufacturers incorporate the environmental concerns into new product development and explore how the green products with appealing environmental attributes can compete with substitutable normal products in the market. We investigate and compare two cases when the economic attribute of the green product is inferior (reduced quality) or superior (enhanced quality) to the normal product. Additionally, we examine how the power structure between two manufacturers (a green manufacturer and a normal manufacturer) can affect decisions on the pricing and the greenness degree. Our equilibrium analysis for different scenarios under different power structures between the two manufacturers highlights the critical role of green efficiency, which integrates consumers' sensitivity towards the degree of the product's greenness and the cost coefficient of greenness. The impact of power structure, product quality, and important model parameters on the pricing and greenness decisions have also been analyzed, thereby providing meaningful insights for practitioners onto the sustainable manufacturing paradigm.