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This study considers a channel with a retailer who satisfies demand by ordering from two suppliers: a low‐cost primary supplier whose production is subject to failure and an expensive reliable backup supplier. We develop a call option contract and evaluate the preference of each party through two negotiable scenarios: (i) the backup supplier only decides on option price and (ii) the backup supplier determines both option and exercise prices. We find that higher authority and flexibility of the backup supplier in making decisions in the second scenario results in a lower option price, yet more possibility of achieving channel coordination compared with the first scenario. While the backup supplier prefers the second scenario, the retailer would rather adopt the other one. The results also shed light on when/how the call option contract can be beneficial for each participant. Specifically, when the primary supplier is unable to supply the whole demand, the proposed option contract can be a win‐win Pareto‐improving profit‐sharing mechanism only if the likelihood of failure in the primary supplier's production is sufficiently low. Otherwise, the backup supplier may be a detrimental option for the retailer. [ABSTRACT FROM AUTHOR]

The increased environmental awareness of consumers has led supply chains (SC) to green their operations. To extract a higher portion from the expanded demand due to greening activities, SC parties may hide key information regarding their green activities. This paper investigates the channel coordination problem in a green SC consisting of a manufacturer who sells a green product through a retailer. Both parties may involve in greening operations to expand an environmental-aware market; however, the retailer is privy to the information about his green sales effort. The analysis of the first-best outcome characterizes the conditions for (i) hold-up problem under which the retailer benefits from free ride on the manufacturer's greening operations effort, (ii) commitment strategy from the retailer to cover for the market expansion due to the manufacturer's underinvestment in greening operations, and (iii) synergy in greening efforts. We then solve for the optimal incentive contracts under asymmetric information. Our analysis suggests that the manufacturer can include her greening effort in the contract to work as an incentive-fee; the higher level of greening effort by the manufacturer incentivizes the retailer to increase his green sales effort. We also show that the wholesale price term works as a screening tool to avoid the low efficient retailer from mimicking the high efficient one. Finally, we show that information asymmetry reduces the social welfare in a green market; it leads to a higher market price and a lower greening effort level. [ABSTRACT FROM AUTHOR]

This study analyses the green channel coordination problem in a two-echelon supply chain where demand is a function of the selling price and the product's green quality. The retailer decides on the selling price while the manufacturer regulates the green quality of the product. To initiate the channel coordination and to establish a win-win outcome for both parties, a hybrid of 'greening cost sharing' and 'revenue sharing' contract (HGRS) is developed. This study contributes to the literature by providing an analytical approach to address the channel coordination and pricing issues in a green supply chain under the consumer environmental awareness while the manufacturer has the ability of enhancing, with investments, the product's green quality. Our study reveals that: (a) the proposed HGRS contract is capable of achieving channel coordination while both supply chain members gain more profit than in decentralised decision making, (b) the new suggested contract enhances the product's green quality, reduces the selling price, and stimulates the market demand, and (c) HGRS contract results in more satisfied customers (by offering low prices) as well as more sustainable operations (by increasing greenness level) at the same time. [ABSTRACT FROM AUTHOR]