Corporate sustainability interactions: A game theoretical approach to sustainability actions

Date
2019-12-01
Authors
Uşar, Damla
Denizel, Meltem
Denizel, Meltem
Soytaş, Mehmet Ali
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Supply Chain Management
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Supply Chain Management
Abstract

Recent global developments lead companies to include into their strategic plans not only economic sustainability but environmental and social sustainability as well. Companies have been investing in environmental and social sustainability to meet stakeholder demand and/or regulatory demands. Considering this as a market mechanism, we view the sustainability actions of companies as interrelated strategic decisions and propose a Stackelberg game to model the effects of competition for sustainability and sustainability spillovers over the sustainability outcomes of companies. We provide equilibrium solutions for the one leader, two followers game over different intervals of competition levels and spillover rates. Using a numerical example, we observe how the sustainability investments and net benefits change as competition levels and spillover rates change and identify the competition-spillover regions, where each player invests the most and has the advantage in terms of benefit. We discuss implications for both the companies and the policy makers.

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This accepted article is published as Damla Durak Usar, Meltem Denizel, Mehmet Ali Soytas, Corporate Sustainability Interactions: A game theoretical approach to sustainability actions, International Journal of Production Economics 218(December 2019);196-211. Doi:10.1016/j.ijpe.2019.05.008. Posted with permission.

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