Title : Incentives for sustainable efforts considering double moral hazard and multi goals in supply chains
Author(s) : Bo WU, Ioana FILIPAS
Abstract : This paper investigates the GHG emission reduction incentive problem when a supply chain faces dual moral hazard and multi-goal. We innovatively characterize dual moral hazard and multi-goal functions of a supply chain and obtain some findings. First, when a brand prioritizes multiple goals, it will make greater efforts to reduce GHG emissions than the manufacturer. Surprisingly, the more complex the environment of moral hazard, the less likely the manufacturer will make concessions. In general, considering multi-goal of brand reduces the problem of double marginalization in a supply chain. Second, while supply chains face complex double moral hazard, the brand’s burden of GHG reduction can only be reduced by prioritizing heavily sustainability and consumer surplus goals. Third, firms face a dual moral hazard when pursuing sustainability and consumer surplus goals, which can sometimes be positive.
Key-words : sustainable efforts; moral hazard; multi goals; risk aversion; uncertainty
JEL Classification : Q51, Q58s
