Environmental Policy Making in Supply Chains under Ambiguity and Competition: A Fuzzy Stackelberg Game Approach

Despite the substantial efforts of governments in promoting sustainable development, there exists considerable debate regarding the environmental policy making approach under information ambiguity and competition. This study investigates market competition between a green and a non-green supply chain (SC) under two government regulation policies, namely, selling price and production quantities. To tackle the policy making challenges, a fuzzy game theoretical model was employed in a centralized and decentralized SC setting. The results revealed that SCs always achieve a higher expected profit under a decentralized structure, regardless of the type of the governments intervention policy. Also, the government’s policy making success was found to be highly dependent on the channel leadership, market competition, and the SC structure. Our findings suggest that the policy makers’ objectives in reducing environmental pollution and increasing revenue are highly achievable, without risk of losing channel coordination and maximum level of efficiency.