Optimal Green Operation and Information Leakage Decisions under Government Subsidy and Supply Uncertainty

This study investigated optimal green operation and information leakage decisions in a green supply chain system. The system consists of one supplier, one leader retailer 1, one follower retailer 2, and the government. In this system, the government subsidizes each retailer based on the selling price of the product. The supplier is subject to a yield uncertainty process. The suppler decides whether to leak leader retailer 1′s order quantity to follower retailer 2 or not. In this study, we first built a Stackelberg game to address the equilibrium green operation decisions, when the supplier has and has not information leakage behavior, respectively. Subsequently, we identify the supplier’s information leakage equilibrium and how such behavior affects retailers’ ex ante profits, consumer surplus, and social welfare through a numerical study. Interestingly, we obtained the following results: (1) Supplier leaks are the unique equilibrium of the supplier. The product’s green degree and wholesale price at supplier’s equilibrium are higher under information leakage than under no information leakage. (2) The supplier’s information leakage behavior is good for leader retailer 1 and bad for follower retailer 2. (3) Information leakage behavior increases both consumer surplus and social welfare under certain conditions. (4) In general, key system parameters (e.g., the subsidy rate, supply uncertainty, supply correlation, and forecast accuracies) positively correlate with consumer surplus and social welfare in the same direction, while they affect retailer 1′s and retailer 2′s ex ante profit in the opposite direction. These findings provide useful insights for businesses to manage demand forecast information and make decisions on the green level of the product in green supply chain management