Electronic Commerce Research and Applications 60 (2023) 101274

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Electronic Commerce Research and Applications

journal homepage: www.elsevier.com/locate/elerap

Ramification of information asymmetry on a green supply chain management

with the cap-trade, service, and vendor-managed inventory strategies
Biswajit Sarkar a,b , Rekha Guchhait a ,∗
aDepartment of Industrial Engineering, Yonsei University, 50 Yonsei-ro, Sinchon-dong, Seodaemun-gu, Seoul 03722, South Korea
b
Center for Transdisciplinary Research (CFTR), Saveetha Dental College, Saveetha Institute of Medical and Technical Sciences, Saveetha University, 162,
Poonamallee High Road, Velappanchavadi, Chennai, Tamil Nadu 600077, India

ARTICLE INFO ABSTRACT

Keywords: The competition in the supply chain business has become considerably challenging. The environment protection
Green supply chain management is another problem adjacent to the competitive business. The supply chain players follow carbon policies to
Vendor-managed inventory reduce carbon emissions along with profit maximization. But, asymmetric information sharing among supply
Carbon policy
chain players affects supply chain profit. This information asymmetry may be profitable for a few supply chain
Reverse logistics
players but not beneficial for an entire supply chain and it may cause a non-coordination within them. A
Radio frequency identification (RFID)
green supply chain management is developed with carbon tax & cap and trade regulations, where information
asymmetry is reduced by the technology support through a radio frequency identification. This study finds
the best service and distance between radio frequency identification readers to reduce asymmetry, and the
optimum order quantity to obtain the maximum total profit for coordination or non-coordination policy. The
objective function becomes a non-linear function with inequality constraint and the optimum solutions are
derived using Kuhn–Tucker conditions. The optimum values of the objective function are found by using two
subproblems because of the alternative scenarios of the cap and trade policy. Results indicate that a non-
coordination policy is a better strategy than a coordination policy when information and product security play
a major role in a green supply chain management. The effects of changes in cost parameters are identified via
sensitivity analysis. The profit of the non-coordination policy is 6.07% more than the coordination profit.

1. Introduction
Green development in commerce and business is getting attention
nowadays because of the current environmental scenarios (Cao et al.,
2022). Green development ensures that products are eco-friendly and
the system emits less or limited carbon. There are several attributes
of green development to trade-off (Ye et al., 2023); among these
attributes, this study concentrates on emissions reduction and the
collection of used products for recycling. The supply chain, which
contributes to the greening process of the system with a combination of
the economic perspective, is defined as green supply chain management
(GSCM). The purpose of this study is two-fold: emissions reduction
from the production & transportation system and secure inventory
from untrustable supply chain players. Different decarbonization poli-
cies (Kugele et al., 2022) help to reduce carbon emissions from the
system. Carbon tax & cap and trade (CAPT) policy are two of these car-
bon policies (Bachar et al., 2022). The manufacturer buys an emissions
limit for a time duration from the government or associative agency,
namely the cap. The cap is the limit of carbon emissions from the
system throughout that time period. The manufacturer pays a tax for
total emissions from the system. Now, if total emissions from the system
go beyond the cap, the manufacturer has to buy the extra limit. If total
emissions are less than the carbon cap, the manufacturer sells the excess
carbon cap to other industries.
The manufacturer has proper information for the usage of CAPT.
But the supply chain players, who do not provide proper information,
are called untrustable. Information is one of the intangible assets of
a business and information loss/partial information causes a loss of
profit in the system. The situation becomes complicated when those
untrustable supply chain players are buyers and the manufacturer has
a vendor-managed inventory (VMI) contract with them. VMI is a con-
tract between the manufacturer and buyers, where the manufacturer
supports buyers by paying inventory holding costs to them. The man-
ufacturer aims to retrieve proper information about inventory and the
corresponding market. This study evaluates the applicability of carbon
policy and data security within a GSCM. The proposed model provides

∗ Corresponding author.
E-mail addresses: bsbiswajitsarkar@gmail.com (B. Sarkar), rg.rekhaguchhait@gmail.com (R. Guchhait).

https://doi.org/10.1016/j.elerap.2023.101274
Received 8 July 2022; Received in revised form 26 March 2023; Accepted 16 May 2023
Available online 18 May 2023
1567-4223/© 2023 Elsevier B.V. All rights reserved.
B. Sarkar and R. Guchhait
Fig. 1. A green supply chain management with RFID under cap and trade policy.
a profitable carbon policy with the combination of radio frequency
identification (RFID) with data security.
1.1. Purpose of the study
The purpose of this study is described below.
• The manufacturer has a VMI contract with untrustable buyers and
they hide information about customer services from the manufac-
turer. Then, the manufacturer has a risk of inventory shrinkage.
An immediate question arises on inventory security and system
profit of the GSCM. Then, the manufacturer takes responsibility
for product management and uses RFID to monitor inventory with
real-time data at buyers’ places.
• Numerous researchers (Wang et al., 2010) use RFID technol-
ogy for product management but they consider a lump sum
amount as an RFID investment. A few studies provide an opti-
mized investment of RFID for product recovery and warehouse
management (Sarkar et al., 2022c). But, there is a lack of op-
timized RFID investment within a GSCM. The purpose of this
study is the security of products from untrustable buyers under an
emissions-controlled supply chain management (SCM) (Fig. 1).
1.2. Contribution to the green supply chain management (GSCM)
The following contributions fulfill the purpose of the study. Table 1
gives a glimpse of the contribution.
• The proposed GSCM is emissions-controlled by carbon tax policy,
CAPT policy, and a combined policy of these two. This study gives
an insight into these three types of carbon policies to choose the
best economically viable carbon policy.
• A partial information flows through the GSCM. The manufacturer
does not receive proper information from untrustable buyers.
The manufacturer does not receive information about service to
customers and customers do not know proper information about
the received service. This GSCM finds an optimal solution for such
an untrustable environment.
2
Electronic Commerce Research and Applications 60 (2023) 101274
• The GSCM optimizes RFID investments considering two-types
of RFID readers, covered area for tracking facility, and sens-
ing & transmission ranges of RFID readers. This study provides
an optimized RFID investment based on the necessity of the
manufacturer instead of a lump sum investment amount.
• It is proved that a traditional supply chain supports the coor-
dination policy (Saxena et al., 2023). What will be the best
scenario when information security involves within the GSCM:
coordination policy or non-coordination policy? The proposed
GSCM model analyzes the best-case scenario under a combined
carbon policy of carbon tax with CAPT.
1.3. Orientation of the paper
The remainder of the paper is organized as follows: Section 2 pro-
vides a literature survey of the study. Section 3 describes the problem
definition, notation, and assumptions about the study. Section 4 de-
scribes the mathematical modeling, and Section 5 presents the solution
methodology of the modeling. Section 6 provides a numerical example,
a case study, and managerial implications of the model. Section 7
provides insights into this study, and Section 8 provides conclusions.
2. Literature review
A brief literature review on GSCM featuring carbon policy, informa-
tion asymmetry, RFID, and revenue sharing is discussed here.
2.1. Carbon policies within a GSCM
The CAPT policy is beneficial for restricting carbon emissions from
any sector. Thus far, several researchers (Kar et al., 2023) have focused
on this issue. Traditional SCM moves toward sustainable SCM (Hota
et al., 2022; Sarkar et al., 2022a), where carbon emissions are consid-
ered a primary concern. A sustainable production system moves toward
sustainable green production, which is studied by Moon et al. (2022). A
carbon emissions reduction for the manufacturing and remanufacturing
industry was discussed by Taleizadeh et al. (2019) with a different
strategy. Ghosh et al. (2020) studied the low carbon involvements
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

Table 1
Comparative study with existing literature.
Author(s) Model Emissions Environm- Technological Reliability Contract
type ental issue improvement type
Lee and Lee (2010) SCM NA NA Investment Reliable NA
Jedda et al. (2012) Sensing NA NA Coverage Reliable NA
Kim and Glock (2014) CLSCM NA NA Tracking Reliable NA
Bai and Chen (2016) Newsvendor (DFA) Carbon CAPT NA Reliable NA
Purohit et al. (2016) Inventory NA NA NA Reliable NA
Daskalakis (2018) Survey Carbon CAPT NA Reliable NA
Guo et al. (2020) GSCM NA Green degree NA NA NA
Cárdenas-Barrón et al. (2020) Inventory NA NA NA NA Credit policy
Li et al. (2021) GSCM Carbon CAPT NA NA Government
subsidies
Padiyar et al. (2022) MESCM NA NA NA NA NA
Chakraborty et al. (2022) E-business NA NA NA NA ToS
Choi et al. (2022) SCM Carbon Emissions NA NA SSMD
Jiang et al. (2023) SCM NA NA DE NA Tariff
Debnath and Sarkar (2023) SCM Carbon Circular NA NA MTO &
economy MTS
This study GSCM Carbon Tax and CAPT RFID Unreliability VMI

CLSCM-Closed-loop supply chain management; SSCM-Smart supply chain management; MESCM-Multi-echelon supply chain management; NA-Not applicable; DFA-Distribution-free
approach; CP-Consignment policy; MTO-Make-to-order; MTS-Make-to-stock; ToS-Terms of service; DM-Digital empowerment; SSMD-Single-setup-multi-delivery.

with the help of CAPT within a dual SCM. This indicates that there
is currently a trend of sustainability utilizing green technology related
to environmental issues. Carbon trading policy under CAPT policy was
investigated by Chen et al. (2021) for an unreliable manufacturing
system whereas Entezaminia et al. (2021) compared facilities of the
carbon tax and CAPT policy.
EURO6 rules (Bielaczyc et al., 2014; Grigoratos et al., 2019) are
specified for vehicle industries to restrict emissions from vehicles.
EURO6 is the regulation to restrict the pollution caused by vehicles.
The evolution of EURO rules started in 1992 (EURO 1), followed by
EURO 2, 3, 4, 5, and the last amendment, EURO6, in 2015. EURO6
limits the emissions of NO2 in the air to improve air quality, and the
limit is different for diesel and petrol vehicles. The limitations of heavy-
duty vehicles are imposed by the EURO6 rules. Gasoline and diesel
vehicles are regulated separately, and EURO6 specifies the particle
measurements in the air. Game policies within the SCM affect the
vehicle market (Bao et al., 2020). They discussed short-term and long-
term game policies within a parallel supply chain. One SCM worked
for battery-facilitated vehicles, and the other was for fuel vehicles. In
any traveling-salesman (TS) problem, the main aim is to optimize the
distance such that the total cost can be reduced quickly. The major
aim of this type of TS and inventory routing problem is reducing the
time (Cárdenas-Barrón et al., 2019).
et al. (2011). Information sharing under the endogenous distribution
channel was studied by Huang et al. (2020). They investigated the
channel where retailers have the superior demand information about
the market demand.
Different types of information-sharing policy were discussed by Yu
and Cao (2020). Two retailers were the part of the SCM with the
manufacturer: an incumbent retailer and an entrant retailer. They
proved that the decision of the incumbent retailer was effective in
making a decision in any policy. Information ambiguity can hamper
inventory management and therefore, the profit of the SCM. RFID
can prevent the loss of SCM because of the inventory crisis due to
information asymmetry and unreliability. The collection of reusable
products is achieved by third-party logistics to reduce the burden of
controlling the collection, cleaning, and sorting. In the proposed model,
it is assumed that the manufacturer undertakes the burden of collecting
the reusable products to obtain the profit, and remanufacturing is
employed to minimize the production cost of products along with the
controlled carbon emissions and other emissions during the end-of-life
(EOL) duration of those products. Therefore, it is concluded that there
is a research gap in the direction, which covers CAPT policy, RFID
technology, and the collection of EOL products for remanufacturing to
save carbon and other emissions. RFID helps find a recovery channel
for product tracing for remanufacturing (Ullah et al., 2021).

2.2. Information asymmetry within a supply chain management 2.3. Radio frequency identification within a supply chain management

Recent technological developments may help determine the amount
of inventory holding within the system. To address this issue, RFID is
considered as the best technology for counting the inventory for large-
size productions (Hong et al., 2010). Zhang and Hou (2005) studied the
sensing and coverage of distances for RFID. They proposed the sensing
distances of readers and transmission coverage. Besides the depth of
technology, there has been a gradual increase in RFID application
in SCM (Ustundag and Tanyas, 2009). However, an investment in
RFID depends on the number of readers and the distance between
two readers, and this covers the total search area. Information flow
within the supply chain is important during the business operations
of the SCM. The information-sharing policy for a buyer of a mixed
channel was discussed by Mukhopadhyay et al. (2008). They solved the
ambiguity of information within a retailer and the manufacturer using
the game strategy. They found that the retailer uses the value-added
service if it is less than the threshold value. Information asymmetry
within an SCM and the duopoly market was studied by Mukhopadhyay
However, market demand cannot be predicted, based on which
the manufacturer can decide the production quantity. If the market
demand becomes random, there is no absolute possibility that the
market demand follows some known distribution function. Several
researchers (Mondal et al., 2022; Vandana et al., 2023) used this
method to solve the issue with an unspecified distribution function.
Complex SCM and inventory problems with logistics could be solved
by metaheuristics (Saha et al., 2023) and fuzzy learning (Mahapatra
et al., 2022). Table 1 provides a comparative study. Most research
articles use RFID to calculate the shrinkage inventory from the system
to improve the revenue structure, which is the main application of RFID
within the SCM. Further, they consider all costs associated with RFID
such as RFID tag price or a lump sum amount as RFID investment.
Therefore, there is no clarity on the required number of RFID tags and
readers to adequately cover such areas. Investments in RFID require this
information for the setup. Further, there is no specification regarding
the method of optimized investment for RFID. How much of the area

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B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

covered the tracking facility? What are the sensing and transmission 3.2. Notation
ranges of the two types of RFID readers? This study provides a specified
amount of investment based on necessity. The RFID cost considered The following notation is used to formulate the described model.
in this study is based on several parameters, and this is the main
specification of the RFID configuration used in the study. Further,
Index
this study develops a reverse logistics scenario wherein products are
consumed again and sent to the manufacturer from the buyers. RFID 𝑖 buyer 𝑖, 𝑖 = 1, 2, … , 𝑛
helps track the product and provides information about products that 𝑗 number of sectors for carbon emissions, 𝑗 = 1, 2, 3, 4
they are still usable or not. Tracing the location of a product is the Decision variables
main advantage of remanufacturing; further, RFID tags can be reused. 𝑠𝑖 service provided by buyer 𝑖
Whenever products are collected, the RFID tag can be used for another 𝑞𝑖 order quantity of buyer 𝑖 (units)
product, if required. Thus, RFID ensures the collection of products 𝑑 distance between two RFID readers (distance units)
by tracking the location, which increases the collection rate of used Parameters
products. The tracing facility is not considered in this study and is part 𝑝𝑖 selling price of buyer per unit product 𝑖 ($/unit)
of future research work. 𝑑𝑖 random demand of buyer 𝑖 (unit)
𝜇𝑖 mean value of demand 𝑑𝑖
2.4. Comparative analysis of the contribution to the literature 𝜎𝑖 standard deviation of random demand 𝑑𝑖
𝑄 total quantity produced by manufacturer (unit),
∑
The comparison table (Table 1) lists some studies from different 𝑄 = 𝑛𝑖=1 𝑞𝑖
backgrounds to illustrate how certain concepts change with inventions. 𝐶𝑘 carbon cap (gallon)
Mathematical models cover the range from the newsvendor to the 𝑐𝑡 carbon tax per unit product ($/unit)
GSCM via closed-loop supply chain management (CLSCM) (Ullah et al., 𝑐 production cost per unit ($/unit)
2021). A distribution-free approach (DFA) is used within the SCM. Envi- 𝐿, 𝐵 length and width of search area (m)
ronmental improvement within the SCM is under consideration by some 𝑅𝑡 transmission radius of Type 1 reader (m)
studies with reliable consequences. Several advanced technologies have 𝑅𝑠 sensing radius of Type 1 reader (m)
been used in several studies considering different aspects. The use of 𝐶1 , 𝐶2 cost of Type 1 and Type 2 readers per unit ($/unit)
RFID is considerably restricted in the study of SCM. The tracing and 𝜆 maximum threshold value of Type 1 reader
sensing models of RFID are studied in different sectors. In addition, the 𝑒𝑗 carbon emissions from different sectors of industry
concept of SCM mostly depends on reliability because the concept of (gallon)
unreliability is not a widely studied area of research. Eventually, many 𝜃 threshold parameter (0 < 𝜃 < 1)
SCM contracts occur under centralized or coordination concepts. A con- 𝑢 purchasing cost/wholesale price per unit product
tract between the two parties is difficult to find in the current literature. ($/unit)
All the above-discussed perspectives of the studies use different studies 𝜌 decay parameter
and backgrounds. The present study combines the above-mentioned 𝑙𝑚𝑖 distance between manufacturer and buyer 𝑖 in
research gaps under one platform such that a GSCM with DFA and forward logistics (km)
VMI can solve the issues of unreliability with the help of RFID from 𝑆𝑐 trading price of carbon cap per unit ($/unit)
an emissions-controlled environmental aspect. Next section describes 𝑆𝑏 purchasing cost of cap per unit ($/unit)
hypotheses of the proposed study. 𝑔𝑚 goodwill loss related cost of manufacturer ($/unit)
𝑔𝑟𝑖 goodwill loss related cost of buyer 𝑖 per unit
3. Problem definition, notation, and assumptions ($/unit)
𝐼𝑖 service investment of buyer 𝑖 ($)
This section describes the characteristics of the problem, related 𝜁𝑖 unit cost coefficient when the service effort of the
notation, and assumptions for formulating the model. buyer fails to fulfill customer satisfaction ($)
ℎ𝑟𝑖 holding cost of buyer 𝑖 ($/unit/unit time)
3.1. Problem definition 𝐹𝑡 fixed transportation cost ($/shipment)
𝑉𝑡 variable cost for transportation ($/unit/km)
Fig. 1 provides an outline of the proposed model. The figure de- 𝑙𝑖𝑚 distance between buyer 𝑖 and manufacturer in
scribes that a manufacturer uses a carbon policy to reduce carbon reverse logistics (km)
emissions from the system. The inventory of the system is controlled by 𝛼 collection rate of used products (%)
the manufacturer through a VMI strategy. The business goes through 𝜙, 𝜑 inventory shrinkage and misplacement rates
a single-manufacturer and multi-buyer GSCM, and the manufacturer Others
takes full responsibility for inventory of all buyers owing to the un- 𝑁1 , 𝑁2 number of Type 1 and Type 2 readers (integer)
reliability of buyers. The manufacturer uses an RFID system to manage 𝑇𝑠 logistics cost ($)
inventory properly and in a timely manner. The manufacturer optimizes 𝑞𝑖1 , 𝑞𝑖2 decision variable of subproblems 𝐿𝐸𝑇 𝑃𝑚1 and
the distance between two readers such that the optimum number of 𝐿𝐸𝑇 𝑃𝑚2
readers can be determined to control the required amount of inventory 𝑞𝑖3 , 𝑞𝑖3 decision variable for subproblems 𝐿𝐸𝑇 𝑃1 and
in the buyers’ place because RFID requires a significant investment for 𝐿𝐸𝑇 𝑃2
installation. The manufacturer pays a carbon tax to the government 𝐹 (𝑑) investment cost of RFID ($)
for emissions from the industry and related transportation and uses a 𝐸[⋅] expected value
carbon cap to limit carbon emissions. The used products are collected at (𝑥)+ max{𝑥, 0}
the end of forward logistics, and the collection rate increases compared 𝑇𝐸 total emissions (gallon)
to the traditional policy because of the RFID tracking system. This study 𝑇 𝐸𝑐 total cost of emissions ($/gallon)
aims to address the unreliability of buyers with marginal emissions 𝐶𝑅 revenue from CAPT ($)
in the environment. The objective function has inequality constraints, 𝐸𝑇 𝑃 expected total profit of coordination policy ($)
and thus, the methodology uses the Kuhn–Tucker conditions for the 𝐸𝑇 𝑃 𝑟 expected total profit of buyer ($)
optimization procedure. 𝐸𝑇 𝑃 𝑚 expected total profit of manufacturer ($)

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B. Sarkar and R. Guchhait
3.3. Assumptions
The following assumptions are used to develop the proposed study.
1. A manufacturing company produces a single type of product. A
single manufacturer deals with 𝑛 buyers from different regions.
Buyers and the manufacturer share symmetric power within
the GSCM. As products are distributed in different regions, the
selling prices of the buyers differ. 𝑛 buyers are independent of
each other, such that there is no relationship between any two
buyers.
2. It may be possible that a supply chain system is not always
fully aggregated such that all participants are reliable. Buyers
hide information from the manufacturer such that a scenario of
information asymmetry arises in the system. The manufacturer
uses the VMI policy to confirm the inventory of all buyers to
overcome the issue of this unreliability. According to the VMI
contract policy, the manufacturer decides when to replenish and
the holding cost of the inventory of the buyer is paid by the
manufacturer. Buyers pay the purchasing and goodwill related
loss costs. The manufacturer sends products to the location of
the buyers after production.
3. The RFID tracking system is used for the issue of asymmetric
information. Information asymmetry arises because buyers do
not share proper information with the manufacturer. Where
the buyers are not reliable, transparency in the trading of the
inventory is questionable. An inventory is the only connection
between the manufacturer and buyer for monetary purposes. For
the assurance of inventory and money, the manufacturer uses
the RFID system (Ullah and Sarkar, 2020). The RFID investment
depends on the holding area of the manufacturer, the RFID
reader, and their capacity of sensing and transmitting.
4. The manufacturer pays a carbon tax (𝑐𝑡 ) for the total emissions.
The limited carbon emissions from production are assured by the
carbon CAPT policy. Emissions from the transportation sector
are ensured under the EURO6 rules. The total carbon emissions
depend on the carbon cap (𝐶𝑘 ), which is purchased from the
government. If the total emissions do not exceed 𝐶𝑘 , then the
manufacturer can sell the excess emissions capacity to other
companies to generate revenue (Bai and Chen, 2016).
5. The delivery of products within the supply chain depends on the
logistics system of the industry. The consumption of the used
product is a part of the GSCM that reduces waste in nature
by recycling/remanufacturing. For any transportation system,
a fixed cost (𝐹𝑡 ) is required to run the business. Another cost
is the variable transportation cost (𝑉𝑡 ), which depends on the
distances and amount of products transported between the man-
ufacturer and buyers. Thus, the transportation cost depends on
the distance between the manufacturer and the buyers.
6. The exact prediction of market demand is not always easy,
and cannot be deterministic. Further, it is assumed that market
demand is random; however, it does not follow any known
distribution. For the random demand of buyer 𝑖, only the mean
(𝜇𝑖 ) and standard deviation (𝜎𝑖 ) are known.
7. As the market demand is random, a high margin of profit is
not always a smooth process. The SCM players adopt a revenue-
sharing policy to support each other (Xiao and Xu, 2013). The
lead time is assumed to be negligible.
4. Mathematical model for GSCM
A two-echelon GSCM is formulated with a single manufacturer and
unreliable multiple buyers. Buyers provide service to customers; this
information is not shared by buyers with the manufacturer. Thus,
information asymmetry occurs within the GSCM. Customer service is
a very sensitive issue for customer satisfaction. For example, the buyer
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Electronic Commerce Research and Applications 60 (2023) 101274
repairs a product for a customer based on the service. However, that
service is not up to the mark of the original product. After a few days,
the capability of the product is reduced, and the customer is offended
by both the service of the buyer and the product. This hampers the
goodwill of the manufacturer; however, the manufacturer is completely
unaware of this scenario because the buyer does not share the informa-
tion that the buyer is providing a service to the customer for products.
Thus, manufacturers face difficulties, and buyers are unreliable.
Market demand cannot always be predicted in a deterministic way,
especially not in the known form of a random probability distribution.
This study assumes that market demand is random; however, the
randomness does not follow any known distribution function. Only the
data set of the demand is known, in addition to the corresponding
mean and standard deviation. The primary problem is identifying the
expected shortage quantity without any distribution function. The DFA
helps solve this issue by using the worst-case scenario (Mukherjee et al.,
2022).
4.1. Buyer’s model for GSCM
Multiple buyers are involved in the GSCM. All buyers and the man-
ufacturer are engaged under a VMI policy for inventory management.
They do not have to pay the holding cost of products because of the VMI
policy agreement with the manufacturer. The market demand of buyer
𝑖 is denoted by 𝑑𝑖 , and the ordered quantity by 𝑞𝑖 . The expected value
of the random market demand 𝑑𝑖 is denoted by 𝜇𝑖 . Then, the expected
surplus amount is denoted by 𝐸[𝑞𝑖 − 𝑑𝑖 ]+ , and the shortage amount is
denoted by 𝐸[𝑑𝑖 − 𝑞𝑖 ]+ (for instance, see Sarkar et al., 2022c). Now,
𝑚𝑖𝑛(𝑞𝑖 , 𝑑𝑖 ) = 𝑑𝑖 − (𝑑𝑖 − 𝑞𝑖 )+ , (𝑞𝑖 − 𝑑𝑖 )+ = (𝑞𝑖 − 𝑑𝑖 ) + (𝑑𝑖 − 𝑞𝑖 )+ . (1)
The expected shortage amount of the inventory √ of buyer 𝑖 is de-
⎡ ( )2
noted by 𝐸[𝑑𝑖 − 𝑞𝑖 ]+ , which has the upper bound 21 ⎢ 𝜎𝑖 2 + 𝑞𝑖 − 𝜇𝑖
⎢
⎣
( )⎤
− 𝑞𝑖 − 𝜇𝑖 ⎥ for any 𝐹 ∈ F; the upper bound is tight. Therefore,
⎥
⎦
√
⎡ ( )2 ( )⎤
1⎢
+
𝐸[𝑑𝑖 − 𝑞𝑖 ] ≤ 𝜎𝑖 2 + 𝑞𝑖 − 𝜇𝑖 − 𝑞𝑖 − 𝜇𝑖 ⎥ . (2)
2⎢ ⎥
⎣ ⎦
𝐸(⋅)+ ensures the positive value of the expression, i.e., (𝑥)+ = max(𝑥, 0).
𝐹 ∈ F implies that the dataset follows a cumulative distribution
function 𝐹 that belongs to the set of cumulative distribution functions
F.
4.1.1. Revenue of buyer 𝑖
Based on market demand, two scenarios arise: 𝑑𝑖 > 𝑞𝑖 , where the
demand is greater than the ordered quantity, and 𝑑𝑖 ≤ 𝑞𝑖 , where the
demand is less than the ordered quantity. The first scenario generates
revenue 𝑝𝑖 𝑞𝑖 , and the second one, 𝑝𝑖 𝑑𝑖 . If 𝑝𝑖 is the unit selling price of
[ ]
the product, then the revenue is 𝑝𝑖 𝐸 𝑚𝑖𝑛(𝑞𝑖 , 𝑑𝑖 ) .
4.1.2. Purchasing cost of buyer 𝑖
Purchasing cost is defined as the expenditure incurred by buying
the product from the manufacturer. The manufacturer produces a single
type of product at the same price for all buyers. Thus, multiple buyers
have the same purchasing costs for the products. If a single unit of
product has a purchasing cost 𝑢 from the manufacturer, then the total
purchasing cost is 𝑢𝑞𝑖 for buyer 𝑖.
4.1.3. Goodwill loss related cost of buyer 𝑖
Owing to the shortage of quantity 𝑑𝑖 > 𝑞𝑖 , some customers do
not receive the product in-time. Thus, buyers face a loss, and this is
represented as the goodwill loss of buyers. If the unit goodwill loss
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

cost is 𝑔𝑟𝑖 for buyer 𝑖, then the total goodwill loss cost is given by 4.2.3. Holding cost for VMI contract
𝑔𝑟𝑖 𝐸[𝑑𝑖 − 𝑞𝑖 ]+ , 𝑞𝑖 < 𝑑𝑖 . When the demand is less than the ordered quantity, a scenario
occurs wherein the surplus amount is held. As per the VMI contract,
4.1.4. Service and customer satisfaction cost the manufacturer pays the holding cost of the buyer. Thus, the expected
Buyer 𝑖 gives service (𝑠𝑖 ) to customers, and this information is surplus amount of buyer 𝑖 is 𝐸[𝑞𝑖 − 𝑑𝑖 ]+ . The per-unit holding cost of
hidden from the manufacturer. This circulates unreliability within the buyer 𝑖 is different, as buyers are located in different regions. If the
per-unit holding cost of buyer 𝑖 is ℎ𝑟𝑖 , then the total holding cost is
GSCM. 𝐼𝑖 denotes the investment in the service by buyer 𝑖. There- ∑ +
𝐼 𝑠2 𝑖 ℎ𝑟𝑖 𝐸[𝑞𝑖 − 𝑑𝑖 ] , 𝑑𝑖 ≤ 𝑞𝑖 .
fore, the total investment for the service is given by 𝑖2 𝑖 for buyer
𝑖 (Mukhopadhyay et al., 2011). Service to customers 𝑠𝑖 lies in the 4.2.4. Goodwill loss related cost of the manufacturer
interval [0, 1]. That is, buyer 𝑖 can provide the maximum service for 𝑠𝑖 = As the full amount of inventory is managed by the manufacturer,
1 and no service for 𝑠𝑖 = 0. The customer satisfaction is closely related the shortage of inventory on the buyer side affects the goodwill of
to the provided service 𝑠𝑖 and the corresponding customer satisfaction the manufacturer. Thus, the manufacturer faces goodwill loss because
cost is represented as (1 − 𝑠𝑖 )2 𝜁𝑖 (Peng et al., 2022). When customers of the shortage. If 𝑔𝑚 is the per unit goodwill loss cost paid by the
are fully satisfied with the service, then (1 − 𝑠𝑖 ) = 0 and the buyer does ∑
manufacturer, the total goodwill loss cost is 𝑔𝑚 𝑖 𝐸[𝑑𝑖 − 𝑞𝑖 ]+ , 𝑞𝑖 < 𝑑𝑖 .
not have to spend money to satisfy customers separately. But, if 𝑠𝑖 ≤ 0
and customers are not satisfied with provided service, buyer 𝑖 spends 4.2.5. RFID cost for product tracking at retailers’ place
𝜁𝑖 amount to satisfy customers. Customer satisfaction is important to RFID technology is used to handle the unreliability of multiple
buyers and they secure it by any means. When customers buy products buyers. Let 𝐿𝐵 meter2 denote the area under the RFID scanning zone,
and receive services with them, customers may think that the services where 𝐿 and 𝐵 m denote the length and breadth of the area, re-
are from the manufacturer. Actually, this information is unknown from spectively. Based on the sensing and transmitting radius, two types of
the manufacturer. In this situation, if customers are not satisfied, buyer RFID readers were used for the area. The Type 1 reader has a higher
𝑖 may have a lost sale. It will cause a goodwill loss for the manufacturer. frequency, and the Type 2 reader has a lower frequency. 𝑅𝑡 denotes the
Thus, buyers always try to satisfy customers. The total cost for service transmitting radius of the Type 1 reader, and 𝑅𝑠 denotes the sensing
𝐼𝑖 𝑠2𝑖
and customer satisfaction is + (1 − 𝑠𝑖 )2 𝜁𝑖 for buyer 𝑖. radius of the Type 2 reader. The relationship between the transmitting
2
radius and sensing radius is 𝑅𝑡 ≥ 2𝑅𝑠 , i.e., the transmitting radius is
more than double the sensing radius of a Type 2 reader. First, an area
4.1.5. Profit of buyers
is covered by the Type 1 reader and then that area is divided again by
The expected total profit of all buyers for the worst-case distribution
the Type 2 reader. The Type 1 reader follows a disk-sensing model to
obtained from Eqs. (1) and (2) is given by
∑ ∑ ∑ provide the complete coverage of the specified area. The disk sensing
[ ]
𝐸𝑇 𝑃𝑟 [𝑞𝑖 , 𝑠𝑖 ] = 𝑝𝑖 𝐸 𝑚𝑖𝑛(𝑞𝑖 , 𝑑𝑖 ) − 𝑢 𝑞𝑖 − 𝑔𝑟𝑖 𝐸[𝑑𝑖 − 𝑞𝑖 ]+ model reduces the error in the detection of products and increases the
𝑖 𝑖 𝑖 sensing power of the system. The Type 2 reader follows an exponential
∑ 𝐼 𝑖 𝑠𝑖 2 ∑ coverage protocol, i.e., the sensing range and distance are inversely
− − (1 − 𝑠𝑖 )2 𝜁𝑖
𝑖
2 𝑖 related. The sensing range of the Type 2 reader decreases exponentially
∑ ∑ 𝐼𝑖 𝑠2𝑖 ∑ (3) with increasing distance. The Type 2 reader is used because it is less
= 𝑝𝑖 𝜇𝑖 − 𝑢𝑄 − − (1 − 𝑠𝑖 )2 𝜁𝑖 expensive than the Type 1 reader. The use of a Type 2 reader for any
𝑖 𝑖
2 𝑖
(√ ) small area is more effective than using an expensive Type 1 reader.
1 ∑ ( )2
− (𝑔𝑟𝑖 + 𝑝𝑖 ) 2
𝜎𝑖 + 𝑞𝑖 − 𝜇𝑖 − (𝑞𝑖 − 𝜇𝑖 ) . The maximum threshold value ⌈ of the
⌉ ⌈ Type⌉1 reader is 𝜆. The number
2 𝑖
of Type 1 readers is 𝑁1 = √𝐿 √
𝐵
and the number of Type
⌈ 2⌉⌈ ⌉⌈ ⌉𝑡
2𝑅𝑡 2𝑅

4.2. Manufacturer’s model for GSCM 4𝑅𝑠 𝐿 𝐵

2 readers is 𝑁2 = √ √ (for instance, see Ullah and
𝑑2 2𝑅𝑡 2𝑅𝑡
Sarkar 2020). The ceiling function is used for the maximum value.
A VMI policy is used by the manufacturer to control the inventory Here, 𝑑 denotes the distance between two readers. If 𝐶1 denotes the
of buyers. As the inventory is controlled by the manufacturer along unit cost of the Type 1 reader and 𝐶2 , the unit cost of the Type 2 reader,
with the other responsibilities of buyers, they should be reliable with then the required RFID cost is given by
the manufacturer for business. However, these buyers are unreliable ⌈ ⌉⌈ ⌉ ⌈ ⌉⌈ ⌉⌈ ⌉
as they hide information from the manufacturer. The manufacturer 𝐿 𝐵 4𝑅𝑠 2 𝐿 𝐵
𝐹 (𝑑) = 𝐶1 √ √ + 𝐶 2 √ √
uses an RFID tracking system for the inventory to ensure the safety 2𝑅 2𝑅 𝑑2 2𝑅 2𝑅
𝑡 𝑡 𝑡 𝑡
of the inventory and the associated profit. The used product or EOL
subject to conditions
life products are collected by the manufacturer from the buyers for
[ √ ]
remanufacturing. ⎛ 3 ⎞
√ ⎜ 𝐿𝑜𝑔 1 − 1 − 𝜃 ⎟
𝑑 ≤ 3 ⎜𝜆 − ⎟ , 𝑅𝑡 ≥ 2𝑅𝑠 . (4)
⎜ 𝜌 ⎟
4.2.1. Revenue of the manufacturer ⎝ ⎠
The wholesale price provides revenue to the manufacturer. The
(for instance, see Zhang and Hou 2005). Therefore, the RFID cost is
manufacturer sells each product at a unit wholesale price 𝑢 to multiple
𝐹 (𝑑).
buyers. The unit wholesale price is higher than the manufacturing cost;
otherwise, the manufacturer will face a loss. Therefore, the revenue of
4.2.6. Logistics cost
the manufacturer is 𝑢𝑄.
The logistics cost of the GSCM belongs to the manufacturer. Two
types of logistics costs are used here: fixed cost 𝐹𝑡 and variable cost 𝑉𝑡 .
4.2.2. Manufacturing cost of products The logistics cost is divided into forward and reverse logistics. Forward
The manufacturer produces a single type of product. If 𝑐 is the logistics are used to carry products from the manufacturer to different
unit manufacturing cost of the green product, the manufacturing cost buyers. Reverse logistics is used to carry the EOL products from buyers
is given by 𝑐𝑄, where 𝑄 denotes the total production quantity. The to the manufacturer. Thus, the fixed cost for the forward GSCM is 𝐹𝑡 ,
∑
manufacturer produces the ordered quantity from buyers, i.e., 𝑄 = and the variable cost is 𝑉𝑡 𝑖 𝑞𝑖 𝑙𝑚𝑖 . Therefore, the total cost of forward
∑ ∑
𝑖 𝑞𝑖 . logistics is 𝐹𝑡 + 𝑉𝑡 𝑖 𝑞𝑖 𝑙𝑚𝑖 . For reverse logistics, the fixed cost is 𝐹𝑡

6
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

∑
and the variable cost is 𝑉𝑡 𝛼 𝑖 𝑞𝑖 𝑙𝑖𝑚 , where 𝛼 denotes the collection 4.2.9. Expected total profit of the supply chain
rate of the used products. The total cost of logistics for the reverse The expected total profit of the GSCM is the sum of the total profits
∑
SCM is 𝐹𝑡 + 𝑉𝑡 𝛼 𝑖 𝑞𝑖 𝑙𝑖𝑚 . Therefore, the total logistics cost of GSCM for of the manufacturer and the buyers.
(∑ ∑ )
transportation is 𝑇𝑠 = 2𝐹𝑡 + 𝑉𝑡 𝑖 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑖 𝑞𝑖 𝑙𝑖𝑚 . [√ ]
∑ ∑ 1∑
𝐸𝑇 𝑃 [𝑞𝑖 , 𝑠𝑖 , 𝑑] = 𝑝𝑖 𝜇𝑖 − 𝑐 𝑞𝑖 − ℎ𝑟𝑖 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 + (𝑞𝑖 − 𝜇𝑖 )
2 𝑖
4.2.7. Carbon emissions, carbon tax, and CAPT regulation 𝑖 𝑖
[√ ]
The major greenhouse gas (GHG) emissions occurs because of the 1∑
− (𝑔𝑟𝑖 + 𝑝𝑖 ) 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 − (𝑞𝑖 − 𝜇𝑖 )
combustion of fossil fuel. Per unit carbon emissions from different 2 𝑖
(√ )
portions of the industry are 𝑒𝑗 . 𝑒1 denotes the carbon emissions rate 𝑔 ∑ ( )2 ∑ 𝐼𝑖 𝑠2𝑖
− 𝑚 𝜎𝑖2 + 𝑞𝑖 − 𝜇𝑖 − (𝑞𝑖 − 𝜇𝑖 ) −
per unit of production for the 𝑄 units. The emissions rates of Type 1 2 𝑖 𝑖
2
and Type 2 RFID readers are different; therefore, 𝑒2 denotes the carbon ( ⌈ ⌉⌈ ⌉
∑ 𝐿 𝐵
emissions rate from the Type 1 reader, and 𝑒3 denotes that from the − (1 − 𝑠𝑖 )2 𝜁𝑖 − 𝐹 (𝑑) − 𝑐𝑡 𝑒1 𝑄 + 𝑒2 √ √
Type 2 reader per unit; 𝑒4 denotes the transportation emissions rate. 𝑖 2𝑅𝑡 2𝑅𝑡
⌈ ⌉⌈ ⌉⌈ ⌉
The carbon tax 𝑐𝑡 is associated with total emissions from the indus- 4𝑅𝑠 2 𝐿 𝐵
+ 𝑒3 √ √
try (Bai and Chen, 2016). Thus, the total amount of carbon emissions 𝑑2 2𝑅𝑡 2𝑅𝑡
from the manufacturing system is ( ( )))
∑ ∑
+𝑒4 2𝐹𝑡 + 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑞𝑖 𝑙𝑖𝑚 − 2𝐹𝑡
𝑇 𝐸 = 𝑒1 𝑄 + 𝑒2 𝑁1 + 𝑒3 𝑁2 + 𝑒4 𝑇𝑠 . (5) 𝑖 𝑖
( )
∑ ∑
The total cost for carbon emissions is − 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑞𝑖 𝑙𝑖𝑚 + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+
{ } 𝑖 𝑖
𝑇 𝐸 𝑐 = 𝑐𝑡 𝑒1 𝑄 + 𝑒2 𝑁1 + 𝑒3 𝑁2 + 𝑒4 𝑇𝑠 . (6)
= 𝛱(𝑞𝑖 , 𝑠𝑖 , 𝑑) + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+
The CAPT policy is used to minimize this amount of GHG emissions
(9)
in the environment. The usage limit of CAPT depends on the capac-
ity of the industry. The industry buys the emissions limit from the If 𝐶𝑘 = 𝑇 𝐸, then 𝐸𝑇 𝑃 [𝑞𝑖 , 𝑠𝑖 , 𝑑] = 𝛱(𝑞𝑖 , 𝑠𝑖 , 𝑑).
government, namely CAP, and this maximum amount of carbon can
be emitted from the industry. If the total emissions are less than the 4.2.10. Profit-sharing policy for coordination between the manufacturer
limit, the industry can sell its excess carbon cap to other industries. and retailers
This is known as cap trading. This regulation is fully associated with A profit-sharing policy is used for the coordinated case. The manu-
the environment in establishing a green environment. The carbon cap facturer shares a percentage of the expected total profit 𝐸𝑇 𝑃 with the
of the manufacturing company is given by 𝐶𝑘 , which is the maximum buyers. It is a profit-sharing policy among business partners for more
capacity of the GHG emissions. The manufacturer can sell an extra efficient business cooperation. The manufacturer shares revenue to
amount of carbon (𝐶𝑘 − 𝑇 𝐸)+ at price 𝑆𝑐 ; when there is a lack of cap, encourage other players. If the sharing commission is 𝜙(0 < 𝜙 < 1) from
the manufacturer buys (𝑇 𝐸 − 𝐶𝑘 )+ amount of carbon by unit price 𝑆𝑏 . the manufacturer to the buyers, the remaining profit is achieved by the
Therefore, manufacturer. The total sharing (TS) to buyers for the profit-sharing
( ) mechanism is 𝑇 𝑆 = 𝜙 (𝐸𝑇 𝑃 ).
𝐶𝑘 − 𝑇 𝐸 = 𝐶𝑘 − 𝑒1 𝑄 + 𝑒2 𝑁1 + 𝑒3 𝑁2 + 𝑒4 𝑇𝑠 ,
( )
𝑇 𝐸 − 𝐶𝑘 = 𝑒1 𝑄 + 𝑒2 𝑁1 + 𝑒3 𝑁2 + 𝑒4 𝑇𝑠 − 𝐶𝑘 .
5. Solution methodology
Given that 𝑆𝑏 > 𝑆𝑐 , which is the cap buying price, is higher than the
excess cap selling price. The CAPT profit is The objective function is solved using a classical optimization with
𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+ . (7) the Kuhn–Tucker condition. Both coordination and non-coordination
cases are discussed with optimized values. The buyers and the man-
ufacturer are symmetric in power and thus optimize their profits in-
4.2.8. Profit of the manufacturer
dividually in the non-coordination case. The optimum results are ob-
The expected total profit of the manufacturer is obtained by sub-
tained from the necessary conditions of the classical optimization, and
tracting all expenses from the wholesale price. Therefore, using Eq. (2),
the global optimality of the solutions is verified by sufficient condi-
the expected total profit is
[√ ] tions. Theorems, lemmas, and propositions are derived to ensure the
1∑ optimality of the solutions.
𝐸𝑇 𝑃𝑚 [𝑞𝑖 , 𝑑] = (𝑢 − 𝑐)𝑄 − ℎ 𝑟𝑖 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 + (𝑞𝑖 − 𝜇𝑖 )
2 𝑖
[ ]
𝑔𝑚 ∑ √ 2 5.1. Non-coordination between the manufacturer and buyers
− 𝜎𝑖 + (𝑞𝑖 − 𝜇𝑖 )2 − (𝑞𝑖 − 𝜇𝑖 ) − 𝐹 (𝑑)
2 𝑖
( ⌈ ⌉⌈ ⌉ The objective functions of the manufacturer and buyer are solved
𝐿 𝐵
− 𝑐 𝑡 𝑒1 𝑄 + 𝑒2 √ √ separately. Each GSCM player optimizes profit using their own ap-
2𝑅𝑡 2𝑅𝑡 proach.
⌈ ⌉⌈ ⌉⌈ ⌉
4𝑅𝑠 2 𝐿 𝐵
+ 𝑒3 √ √ (8)
𝑑2 2𝑅𝑡 2𝑅𝑡 5.1.1. Optimization of buyers’ total profit
( ( ))) The optimum solutions for buyers are obtained from Eq. (3). The
∑ ∑
+𝑒4 2𝐹𝑡 + 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑞𝑖 𝑙𝑖𝑚 − 2𝐹𝑡 first-order derivatives provide the optimum results of the decision
𝑖 𝑖 variables. The optimum values of the decision variables are given in
( )
∑ ∑ Theorem 1. The existence of the optimum order quantity (𝑞𝑖∗ ) is given
− 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑞𝑖 𝑙𝑖𝑚 by Lemmas 1 and 2. Sufficient conditions prove the globality of the
𝑖 𝑖
solution, which is given by Proposition 1.
+ 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+
=𝛱𝑚 (𝑞𝑖 , 𝑑) + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+ . Theorem 1. The optimal ordered quantity and service for buyer 𝑖 are
𝜎𝛥 2𝜁𝑖
given by 𝑞𝑖∗ = 𝜇𝑖 + √ 𝑖 1 2 and 𝑠∗𝑖 = 𝐼 +2𝜁 , respectively.
If 𝐶𝑘 = 𝑇 𝐸, then 𝐸𝑇 𝑃𝑚 [𝑞𝑖 , 𝑑] = 𝛱𝑚 (𝑞𝑖 , 𝑑). 1−𝛥1 𝑖 𝑖

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B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274
[ ( √ ) ]
Proof. See Appendix A. □ √ 3
log(1 − 1 − 𝜃)
𝐿𝐸𝑇 𝑃𝑚2 = 𝛱𝑚 (𝑞𝑖 , 𝑑) + 𝜆1 3 𝜆− −𝑑
𝜌
𝜎 𝛥1
Lemma 1. 𝑞𝑖∗ = 𝜇𝑖 + √ 𝑖 is the optimal value of the ordered quantity
1−𝛥21
+ 𝜆2 (2𝑅𝑠 − 𝑅𝑡 ) − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 ), 𝑇 𝐸 > 𝐶𝑘 . (12)
𝑞𝑖 if 𝛥21 < 1.

−2𝑢+𝑔𝑟𝑖 +𝑝𝑖
Proof. As 𝛥1 = , 𝛥21 < 1 implies 𝑝𝑖 > 𝑢 − 𝑔𝑟𝑖 . That is, if the Theorem 2. The optimum values of 𝑞𝑖 in Eqs. (11) and (12) are given by
𝑔𝑟𝑖 +𝑝𝑖 𝜎𝛥 𝜎𝛥
𝑞𝑖1 = 𝜇𝑖 + √ 𝑖 212 and 𝑞𝑖2 = 𝜇𝑖 + √ 𝑖 222 , respectively. The optimum value
value of the selling price (𝑝𝑖 ) is greater than (𝑢 − 𝑔𝑟𝑖 ), then 𝑞𝑖∗ yields a 1−𝛥21
√ [ √ ] 1−𝛥22
feasible solution and 𝑞𝑖∗ > 0. Otherwise, 𝑞𝑖∗ = 0. □ 3
log(1− 1−𝜃)
of 𝑑 is 𝑑 ∗ = 3 𝜆 − 𝜌
, which is the same for both Eqs. (11)

Lemma 2. If the ordered quantity 𝑞𝑖 is exact as 𝜇𝑖 (in a deterministic and (12).

sense), then there is no robustness in the market demand. Then, the selling
price of the product is 𝑝𝑒𝑞 Proof. See Appendix B. □
𝑖 = 2𝑢 − 𝑔𝑟𝑖 .

𝑒𝑞
−2𝑢+𝑝𝑖 +𝑔𝑟𝑖 Theorem 3. The optimum value of 𝑞𝑖 of Eq. (10) is given by
Proof. If 𝑞𝑖 = 𝜇𝑖 , then 𝛥1 = 0. This implies = 0, i.e., 𝑝𝑒𝑞
𝑖 =
𝑒𝑞
𝑝𝑖 +𝑔𝑟𝑖 {
2𝑢 − 𝑔𝑟𝑖 . 𝑝𝑖 is denoted as 𝑝𝑒𝑞
𝑖 for the deterministic case. Buyer 𝑖 can sell
𝑞𝑖1 , 𝐿𝐸𝑇 𝑃𝑚1 > 𝐿𝐸𝑇 𝑃𝑚2 ;
𝑞𝑖∗ =
a product at price 𝑝𝑒𝑞 𝑖 . In general, 𝑝𝑒𝑞
𝑖 > 𝑝𝑖 . □ 𝑞𝑖2 , 𝐿𝐸𝑇 𝑃𝑚2 > 𝐿𝐸𝑇 𝑃𝑚1

Proposition 1. 𝑞𝑖∗ and 𝑠∗𝑖 yield the optimum values if both (𝑝𝑖 +𝑔𝑟𝑖 )𝜎𝑖2 > 0 such that 𝐿𝐸𝑇 𝑃𝑚 is the maximum.
and 𝐼𝑖 + 2𝜁𝑖 > 0, simultaneously.
Proof. See Appendix B. □
Proof. See Appendix A. □
Lemma 3. If 𝛥221 < 1, then 𝑞𝑖1 exists and 𝑞𝑖1 > 0. Similarly, if 𝛥222 < 1,
then 𝑞𝑖2 exists and 𝑞𝑖2 > 0.
5.1.2. Optimization of manufacturer’s total profit { }
Proof. 𝛥221 < 1 implies that ℎ𝑟𝑖 𝑔𝑚 −[𝑢−𝑐−(𝑐𝑡 +𝑆𝑐 ) 𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) −
As the two constraints are in the form of an inequality, the Kuhn– 2
{ }
𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )] −[𝑢−𝑐 −(𝑐𝑡 +𝑆𝑐 ) 𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) −𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )](𝑔𝑚 −
Tucker condition is used to solve Eq. (8). Now, the distance between
ℎ𝑟𝑖 ) > 0. If this condition holds, then the optimum 𝑞𝑖1 for subproblem
the two
⌈ ⌉ readers 𝑑 is a decision variable;
⌈ 2 ⌉ however,
( 2 ) it is a ceiling function
4𝑅𝑠 2 𝐿𝐸𝑇 𝑃𝑚1 exists and 𝑞𝑖1 > 0. Otherwise, 𝑞𝑖1 should have a zero value for
. This can be written as
4𝑅𝑠
=
4𝑅𝑠
− 𝛯, where 𝛯 ∈ [0, 1) is { }
𝑑 2 𝑑 2 𝑑2 a real solution. Similarly, ℎ𝑟𝑖 𝑔𝑚 − [𝑢 − 𝑐 − (𝑐𝑡 + 𝑆𝑏 ) 𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) −
a sawtooth function. The modified profit function of the manufacturer { }
𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )]2 −[𝑢−𝑐 −(𝑐𝑡 +𝑆𝑏 ) 𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) −𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )](𝑔𝑚 −
after using Kuhn–Tucker conditions can be written as ℎ𝑟𝑖 ) > 0 for a real non-zero 𝑞𝑖2 for 𝛥221 < 1. □
[ ]
∑ ∑ ℎ𝑟𝑖 √
𝐿𝐸𝑇 𝑃 𝑚 = 𝑢 𝑞𝑖 − 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 + (𝑞𝑖 − 𝜇𝑖 )
2 Lemma 4. If there is no robustness in the market demand, then the
𝑖 𝑖
[ ]
𝑔𝑚 ∑ √ 2 ∑ amount of 𝑞𝑖 is exactly 𝜇𝑖 . Then, the wholesale price of the manufacturer
− 𝜎𝑖 + (𝑞𝑖 − 𝜇𝑖 )2 − (𝑞𝑖 − 𝜇𝑖 ) − 𝑐 𝑞𝑖 is 𝑢 = 𝑐 + (𝑐𝑡 + 𝑆𝑐 )(𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )) + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) for 𝐿𝐸𝑇 𝑃𝑚1 and
2 𝑖 𝑖
( ⌈ ⌉⌈ ⌉ {( ) } 𝑢 = 𝑐 + (𝑐𝑡 + 𝑆𝑏 )(𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )) + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) for 𝐿𝐸𝑇 𝑃𝑚2 .
𝐿 𝐵 4𝑅𝑠 2
− 𝑐 𝑡 𝑒1 𝑄 + 𝑒2 √ √ + 𝑒 3 − 𝛯
2𝑅 2𝑅 𝑑2 Proof. No robustness in the market demand implies that 𝑞𝑖1 = 𝜇𝑖 . This
⌈ ⌉⌈ ⌉ 𝑡 ) 𝑡 ( implies that 𝛥21 = 0. Thus, the wholesale price of the manufacturer
𝐿 𝐵 ∑
√ √ + 𝑒 𝑇
4 𝑠 − 𝐹 (𝑑) − 2𝐹 𝑡 − 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 is 𝑢 = 𝑐 + (𝑐𝑡 + 𝑆𝑐 )(𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )) + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) for 𝐿𝐸𝑇 𝑃𝑚1 .
2𝑅𝑡 2𝑅𝑡 𝑖 Similarly, for the subproblem 𝐿𝐸𝑇 𝑃𝑚2 , 𝑞𝑖2 = 𝜇𝑖 for no robustness; and
)
∑ thus, 𝛥22 = 0, which yields the wholesale price 𝑢 = 𝑐 + (𝑐𝑡 + 𝑆𝑏 )(𝑒1 +
+𝛼 𝑞𝑖 𝑙𝑖𝑚 + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+ 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )) + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ). □
𝑖
[ ( √ ) ] Sufficient conditions provide the global optimality of the solutions
√ 3
log(1 − 1 − 𝜃) ( )
+ 𝜆1 3 𝜆− − 𝑑 + 𝜆2 2𝑅𝑠 − 𝑅𝑡 given by Proposition 2.
𝜌

with the Kuhn–Tucker conditions Proposition 2. 𝑞𝑖∗ and 𝑑 ∗ have the global optimum value if either (ℎ𝑟𝑖 +
⌈ ⌉⌈ ⌉
𝜕𝐿𝐸𝑇 𝑃𝑚 𝜕𝐿𝐸𝑇 𝑃𝑚 𝑔𝑚 )𝜎𝑖 2 > 0 and 24𝑅2𝑠 √𝐿 √
𝐵
= 0, = 0, 𝜆1 ≥ 0, 𝜆2 ≥ 0, [ ] 2𝑅𝑡 2𝑅𝑡
𝜕𝑞𝑖 𝜕𝑑 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) > 0 simultaneously or (ℎ𝑟𝑖 + 𝑔𝑚 )𝜎𝑖 2 > 0 and
[ ( √ ) ] ⌈ ⌉⌈ ⌉
√ 3
log(1 − 1 − 𝜃) [ ]
𝜆1 3 𝜆− − 𝑑 = 0, 24𝑅2𝑠 √𝐿 √
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑏 ) > 0 simultaneously.
𝜌 (10)
2𝑅𝑡 2𝑅𝑡
( √ )
√ 3
log(1 − 1 − 𝜃)
𝜆2 (2𝑅𝑠 − 𝑅𝑡 ) = 0, 3 𝜆 − − 𝑑 ≤ 0, Proof. See Appendix B. □
𝜌
2𝑅𝑠 − 𝑅𝑡 ≤ 0,

where 𝜆1 and 𝜆2 denote the Lagrange multipliers. Now, 𝐿𝐸𝑇 𝑃𝑚 has two 5.2. Coordination between the manufacturer and buyers
subproblems: 𝐿𝐸𝑇 𝑃𝑚1 and 𝐿𝐸𝑇 𝑃𝑚2 .
[ ( √ ) ]
√ 3
log(1 − 1 − 𝜃) The objective function of Eq. (9) with two inequality constraints is
𝐿𝐸𝑇 𝑃𝑚1 = 𝛱𝑚 (𝑞𝑖 , 𝑑) + 𝜆1 3 𝜆− −𝑑
𝜌 considered for the coordination case. The objective function with the
inequality constraint is converted into the Lagrange function using a
+𝜆2 (2𝑅𝑠 − 𝑅𝑡 ) + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸), 𝐶𝑘 > 𝑇 𝐸 (11) Lagrange multiplier.

8
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274
[√ ] [ ]
∑ ∑ 1∑
𝐿𝐸𝑇 𝑃 = 𝑝𝑖 𝜇𝑖 − 𝑐 𝑞𝑖 − ℎ𝑟𝑖 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 + (𝑞𝑖 − 𝜇𝑖 ) 𝑔𝑚 + 2 𝑐 + (𝑐𝑡 + 𝑆𝑏 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) for subproblems
𝑖 𝑖
2 𝑖 𝐿𝐸𝑇 𝑃1 and 𝐿𝐸𝑇 𝑃2 , respectively.
[√ ]
1∑
− (𝑔𝑟𝑖 + 𝑝𝑖 ) 𝜎𝑖2 + (𝑞𝑖 − 𝜇𝑖 )2 − (𝑞𝑖 − 𝜇𝑖 ) Proof. The proof is similar as that of Lemma 4. □
2 𝑖
[√ ] From sufficient conditions, it can be concluded that as the second
𝑔𝑚 ∑ ( )2 ∑ 𝐼𝑖 𝑠2𝑖
order derivatives of the Lagrangian function with respect to the opti-
− 𝜎𝑖2 + 𝑞𝑖 − 𝜇𝑖 − (𝑞𝑖 − 𝜇𝑖 ) −
2 𝑖 𝑖
2 mum decision variables are negative and the principal minors are in an
( ⌈ ⌉⌈ ⌉ alternative sequence of signs; the obtained values of decision variables
∑ 𝐿 𝐵
− 2
(1 − 𝑠𝑖 ) 𝜁𝑖 − 𝐹 (𝑑) − 𝑐𝑡 𝑒1 𝑄 + 𝑒2 √ √ are global, which is established in Proposition 3.
𝑖 2𝑅𝑡 2𝑅𝑡
( )⌈ ⌉⌈ ⌉ ) Proposition 3. 𝑞𝑖∗ , 𝑠∗𝑖 , and 𝑑 ∗ have the global optimum value if either
2
4𝑅𝑠 𝐿 𝐵 (ℎ𝑟𝑖 + 𝑔𝑚 + 𝑔𝑟𝑖 + 𝑝𝑖 )𝜎𝑖 2 > 0, 𝐼𝑖2 + 2𝜁𝑖 > 0, and
+ 𝑒3 −𝛯 √ √ + 𝑒4 𝑇𝑠 − 2𝐹𝑡 ⌈ ⌉⌈ ⌉
𝑑2 2𝑅 2𝑅 2 𝐿 𝐵 [ ]
𝑡 𝑡 24𝑅𝑠 √ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) > 0 simultaneously or (ℎ𝑟𝑖 + 𝑔𝑚 )𝜎𝑖 2
( ) [ ( √ ) 2𝑅𝑡 2𝑅𝑡 ⌈ ⌉⌈ ⌉
∑ ∑ √ 3
log(1 − 1 − 𝜃) [ ]
− 𝑉𝑡 𝑞𝑖 𝑙𝑚𝑖 + 𝛼 𝑞𝑖 𝑙𝑖𝑚 + 𝜆1 3 𝜆− > 0, 𝐼𝑖2 + 2𝜁𝑖 > 0, and 24𝑅2𝑠 √𝐿 √
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑏 ) > 0
𝑖 𝑖
𝜌 2𝑅𝑡 2𝑅𝑡
simultaneously.
]
−𝑑 + 𝜆2 (2𝑅𝑠 − 𝑅𝑡 ) + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸)+ − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 )+ , Proof. See Appendix C. □

6. Numerical experiments
(13)

with Khun-Tucker conditions similar to those in Eq. (10). Now, similar A numerical example is tested here to establish the mathemati-
to Section 5.1.2, 𝐿𝐸𝑇 𝑃 has two subproblems as cal model numerically. In other words, numerical analysis establishes
[ ( √ ) ] the convergence of the objective function. The supportive values of
√ 3
log(1 − 1 − 𝜃)
𝐿𝐸𝑇 𝑃1 = 𝛱(𝑞𝑖 , 𝑠𝑖 , 𝑑) + 𝜆1 3 𝜆− −𝑑 the input parameters are listed in Table 2. The data are obtained
𝜌 from Xiao and Xu (2013), Bai and Chen (2016), and Sarkar et al.
( ) (2022c). However, the entire dataset may not be exactly similar to
+ 𝜆2 2𝑅𝑠 − 𝑅𝑡 + 𝑆𝑐 (𝐶𝑘 − 𝑇 𝐸), 𝐶𝑘 > 𝑇 𝐸 (14) the literature because of the convergence of the program. Initially,
[ ( √ ) ] the numerical experiment was started with the same dataset as that
√ 3
log(1 − 1 − 𝜃)
𝐿𝐸𝑇 𝑃2 = 𝛱(𝑞𝑖 , 𝑠𝑖 , 𝑑) + 𝜆1 3 𝜆− −𝑑 obtained from the literature. A combination of several topics formulates
𝜌
new characteristics of the function. Simultaneously, the convergence
( ) accuracy changes depending on the function. Further, all concepts are
+ 𝜆2 2𝑅𝑠 − 𝑅𝑡 − 𝑆𝑏 (𝑇 𝐸 − 𝐶𝑘 ), 𝑇 𝐸 > 𝐶𝑘 . (15)
not exactly similar to the literature, and all data is not available for
new ideas. These values are selected based on the results of a survey.
Theorem 4. The optimum values of 𝑞𝑖 in Eqs. (14) and (15) are given by Four buyers are selected for the experiment. The four buyers have
𝜎𝛥 𝜎𝛥
𝑞𝑖3 = 𝜇𝑖 + √ 𝑖 312 and 𝑞𝑖4 = 𝜇𝑖 + √ 𝑖 322 , respectively. The optimum value one manufacturer, and the retail price of the product for each buyer
1−𝛥31
√ [ √3
] 1−𝛥32 is different. This difference in the retail price is attributed to regional
∗ log(1− 1−𝜃) effects because the four buyers are located in different regions. Table 3
of 𝑑 is 𝑑 = 3 𝜆 − 𝜌
, which is the same for both Eqs. (14)
presents the results of the experiment. The expected total profit for the
and (15).
coordination business is $83, 784.18. In the non-coordination policy, the
profits of buyers and the manufacturer are $70,058.84 and $18,812.70,
Proof. See Appendix C. □
respectively. The results indicate that the required number of both
Type 1 and Type 2 readers for the assumed space is 4. Further, this
Theorem 5. The optimum value of Eq. (13) is given by
{ study indicates that the non-coordination profit is greater than the
𝑞𝑖3 , 𝐿𝐸𝑇 𝑃1 > 𝐿𝐸𝑇 𝑃2 ; coordination profit, i.e., 𝐸𝑇 𝑃𝑟 + 𝐸𝑇 𝑃𝑚 > 𝐸𝑇 𝑃 . This is a property
𝑞𝑖∗ =
𝑞𝑖4 , 𝐿𝐸𝑇 𝑃2 > 𝐿𝐸𝑇 𝑃1 of blockchain. The main theme of a blockchain is non-coordination
profitability, followed by information transparency and immutability.
such that the 𝐿𝐸𝑇 𝑃 of Eq. (13) is the maximum. As the projected aim of this study is to remove the unreliability of the
system, the results support this hypothesis.
Proof. The proof is similar to that of Theorem 3. □
6.1. Analysis of carbon emissions in an RFID-enable GSCM
Lemma 5. For a real, positive, and non-zero 𝑞𝑖3 , 𝛥231 is less than one.
Similarly, 𝛥232 is less than one for the existence of a nonzero, real, and The results indicate that the total emissions 𝑇 𝐸 from GSCM are
positive 𝑞𝑖4 . 35, 062.49 gallons in the coordination policy. 10.82% of emissions
of the total emissions are from the production sector, 89.07% are
Proof. For 𝛥231 > 1 or 𝛥232 > 1, the value of the ordered quantity is from the transportation sector, and 0.103% are from the RFID sec-
an imaginary number. Therefore, 𝛥231 < 1 implies 𝑝𝑖 > 𝑐 − 𝑔𝑟𝑖 − 𝑔𝑚 + tor. These results indicate that the maximum portion of emissions is
(𝑐𝑡 + 𝑆𝑐 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ). The selling price of a from transportation, followed by production. In the non-coordination
product should be greater than this value. Similarly, 𝛥232 < 1 implies policy, the total emissions are 36, 885.40 gallons. The emissions from
𝑝𝑖 > 𝑐 − 𝑔𝑟𝑖 − 𝑔𝑚 + (𝑐𝑡 + 𝑆𝑏 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ). This is the production, transportation, and RFID are 10.84%, 89.06%, and
the minimum selling price of the product. □ 0.098%, respectively. In comparison, the total emissions from the non-
coordination policy are greater than those from the coordination case.
Lemma 6. In the deterministic sense, when no robustness occurs in the Meanwhile, the purchased carbon cap 𝐶𝑘 is less than the total emitted
market demand, the selling price of the product is 𝑝𝑖 = ℎ𝑟𝑖 − 𝑔𝑟𝑖 − 𝑔𝑚 + carbon 𝑇 𝐸 for each sector. Thus, the manufacturer again buys the extra
[ ]
2 𝑐 + (𝑐𝑡 + 𝑆𝑐 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} + 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) and 𝑝𝑖 = ℎ𝑟𝑖 − 𝑔𝑟𝑖 − emissions capacity (see Fig. 2).

9
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

Table 2
Input values of parameters.
Parameters Values Parameters Values
𝑛 4 (𝑔𝑟 1 , 𝑔𝑟 2 , 𝑔𝑟 3 , 𝑔𝑟 4 ) $(7, 6.4, 4.8, 6)/unit
(𝑝1 , 𝑝2 , 𝑝3 , 𝑝4 ) $(350, 365, 360, 355)/unit (𝜎1 , 𝜎2 , 𝜎3 , 𝜎4 ) (5.9, 5.3, 5.8, 5.2)
(𝜇1 , 𝜇2 , 𝜇3 , 𝜇4 ) (238.3, 238.7, 239.2, 238.5) unit (𝐼1 , 𝐼2 , 𝐼3 , 𝐼4 ) $(2, 3, 5, 4)
(ℎ𝑟 1 , ℎ𝑟 2 , ℎ𝑟 3 , ℎ𝑟 4 ) $(0.65c, 0.78c, 0.66c, 0.64c)/unit/unit time (𝜁1 , 𝜁2 , 𝜁3 , 𝜁4 ) (0.7, 0.8, 0.3, 0.5)
(𝑙1𝑚 , 𝑙2𝑚 , 𝑙3𝑚 , 𝑙4𝑚 ) (45, 52, 49, 42) km (𝑙𝑚1 , 𝑙𝑚2 , 𝑙𝑚3 , 𝑙𝑚4 ) (44, 51, 43, 45) km
𝐹𝑡 $0.2/shipment 𝑆𝑠 40 m
(𝐿, 𝐵) (200, 178) m (𝐶1 , 𝐶2 ) $(130, 90)/reader
𝑔𝑚 $78/unit 𝑉𝑡 $0.1/km
𝑐 $58/unit 𝑢 $290/unit
𝜆 10 𝜌 0.032
𝑐𝑡 $3.2/unit (𝑒1 , 𝑒2 , 𝑒3 , 𝑒4 ) (4, 4, 5, 5.5)
𝐶𝑘 10,000 gallon 𝑆𝑐 $2.2/unit emissions
𝑆𝑏 $3.2/unit emissions 𝛼 0.3

Table 3
Optimum results of the model.
Coordination policy
Variables Optimum values Results
(𝑞1 ∗ , 𝑞2 ∗ , 𝑞3 ∗ , 𝑞4 ∗ ) (236.82, 236.84, 237.85, 237.25) unit (Type 1, Type 2) (4,4)
(𝑠1 ∗ , 𝑠2 ∗ , 𝑠3 ∗ , 𝑠4 ∗ ) (0.41, 0.35, 0.11, 0.20) 𝐸𝑇 𝑃 $83,784.18
𝑑∗ 109.93 m
Non-coordination policy
Manufacturer
𝑄 999.31 unit (Type 1, Type 2) (4,4)
𝑑∗ 109.93 m 𝐸𝑇 𝑃 𝑚 $18,812.70
Buyers
(𝑞1 ∗ , 𝑞2 ∗ , 𝑞3 ∗ , 𝑞4 ∗ ) (233.58, 235.10, 234.96, 234.53) unit 𝐸𝑇 𝑃 𝑟 $70,058.84
(𝑠1 ∗ , 𝑠2 ∗ , 𝑠3 ∗ , 𝑠4 ∗ ) (0.41, 0.35, 0.11, 0.20)

and for the carbon tax system is $160,168.25 whereas the profit for
the combined system is $83,784.18. These observations provide the
following suggestions for the improvement in the emissions issue with
the combination of an attractive profit (see Fig. 3).

• The emissions from the CAPT policy are more than the carbon
Fig. 2. Total emissions from three types of carbon policies in GSCM.
• This study considers traditional fuel and energy resources as no
6.1.1. Discussions about carbon tax policy, CAPT policy, and combined
policy of carbon tax with CAPT
Total emissions from the GSCM is 35,347.54 gallons when only
carbon tax (𝐾 = 0 = 𝑆𝑐 , 𝑆𝑏 = 0) is used in the system without CAPT
and the associated carbon tax is $113,112.12. When only CAPT is used
without a carbon tax (𝑐𝑡 = 0), carbon emissions from the system are
35,478.37 gallons and the associated cost is $81,530.80 for buying an
extra cap for emissions. Whereas for the combined system of carbon tax
and CAPT policy, the emissions are 35,062.49 gallons. The associated
• For the sake of monetary concern, it is a very common phe-
carbon tax is $112,199.6 and $80,199.86 is required for buying an extra
cap for carbon emissions.
From the results, it is found that both carbon tax and cost for CAPT
are less in the combined system. The combined system requires less
carbon tax than the only carbon tax policy and less cost for CAPT for
buying a carbon cap for extra emissions than the previous carbon cap of
emissions. Meanwhile, the profit for the CAPT system is $190,201.97,
tax policy. One of the possible causes of more emissions in the
CAPT is that once the industry buys some limit of emissions, it
becomes the habit to use the maximum capacity of the limit.
Until exhausted the limit, they do not need to worry. It seems
like a one-time investment for buying. Whereas for the time of
using carbon tax policy, tax per unit is fixed. The total cost of
tax increases with the emissions. It is a continuous process of cost
calculation based on the use. Thus, they try to emit less carbon as
they are continuously evaluating the system based on emissions.
specifications about renewable energy resources are given. In
this circumstances, the results show that the combined policy
of carbon tax and CAPT is more effective to reduce the total
emissions of the system. Both the effect (continuous evaluation
of emissions for tax and one-time buying of carbon cap) are
active in the combined system. The environmental perspective of
sustainability is to reduce emissions in such a way that the system
optimizes its profit. As both the carbon tax cost and CAPT cost are
less in the combined policy along with less total emissions along
with a good profit, the perspective is fulfilled.
nomenon that minimum cost involvement gives more profit. Thus,
it is natural when the investment for CAPT or carbon tax will not
be in the system, the profit will be high. In the case of coordina-
tion, the profit will be then $266,704.14, which is higher than the
other three cases as carbon tax policy, CAPT policy, or combined
policy of carbon tax with CAPT. But, this era goes through a
very rough challenge of environmental stability. This starts to

10
B. Sarkar and R. Guchhait
Fig. 3. Comparison between emissions and associated costs between three types of carbon policies.
happen since the last two decades, approximately. The existence
of wildlife and mankind is threatened due to global warming and
one of the main causes of this is carbon emissions from industries.
Thus, sustainability is one of the aims of industries nowadays with
the reduction of carbon emissions. Thus, only profit maximization
is not the aim, rather profit maximization with environmental
protection is the objective.
6.2. Discussions of special cases
Two special cases are discussed in detail to describe the effect of
unreliability of buyers on the total profit.
6.2.1. Special case 1. Profit analysis of the GSCM without RFID
If there is no area under the RFID scanning facility, 𝐿 = 0 and 𝐵 = 0,
then the expected total profit of the system is $84,894.58, which is
more than the resulting profit. This is because buyers are treated as
reliable and no such fraud occurs. The associated savings are from the
emissions cost of RFID, which is $115.20. If the screening facility of
RFID is not applicable for unreliable buyers, there is some inventory
shrinkage and misplacement (Biswal et al., 2018). Table 4 compares
the different rates of shrinkage and misplacement. If 𝜙 denotes the
inventory shrinkage rate and 𝜑 denotes the inventory misplacement
rate, the total invisible inventory of the manufacturer is 𝑄(𝜙 + 𝜑); the
recorded inventory will be 𝑄(1 − 𝜙 − 𝜑) in the coordination policy.
The misplacement rate of the inventory is assumed to be 1%. The
system cannot earn profit without RFID in an unreliable scenario; even
if the shrinkage rate is 1% or more, the system undergoes a loss. With
respect to the perspective of reliability without RFID, there is no chance
of earning profits with inventory shrinkage because it is acceptable
that the reliability is more acceptable within the contract between
two SCM players. Shoplifting is a major cause of inventory shrinkage.
Employment theft is another major cause of shrinkage, followed by
inventory paperwork, which can be attributed to human error.
6.2.2. Special case 2. Profit analysis of the GSCM without RFID and service
Whenever buyers are reliable and there is no investment in the
service, customer satisfaction is zero, i.e., 𝜁𝑖 = 0. The expected total
profit is $84,896.15. This is slightly more than that obtained in Special
11
Electronic Commerce Research and Applications 60 (2023) 101274
case 1. This is because, as buyers become reliable, they do not need to
invest in extra services for customer satisfaction. The loyalty of buyers
is the key to the success of a business.
6.3. Profit-sharing with untrustable supply chain players under coordination
policy
Profit sharing policy for the coordination policy saves the coordi-
nation ally. In the non-coordination policy, the profit of all buyers is
78.83% of the total profit and the manufacturer contributes 21.17%
profit. Thus, an enormous percentage profit of the non-coordination
policy is generated by buyers. In the coordination policy, the scenario
may change as we have the total system profit. To make sure that
buyers will stay in the supply chain, the manufacturer shares a per-
centage of (𝜙%) the total profit of the coordination policy with buyers.
But, the shared percentage 𝜙 should be greater than the percentage
of the non-coordination policy, i.e., 𝜙 > 78.83%. Else, buyers will not
stay in the supply chain as they can earn profit in a non-coordination
business policy. The total profit of the system in the coordination policy
is $83,784.18. Thus, the manufacturer shares 𝜙 = 80% of the total
profit with the buyers. Then, 𝜙(𝐸𝑇 𝑃 ) = $67, 027.344 is shared with
the buyers, and the remaining $15,756.836 amount is retained by the
manufacturer. Now, buyers earn more profit in the coordination policy
than the non-coordination policy with the profit-sharing policy.
6.4. Case study
A case study is conducted based on this study on a company situated
in India. They use the same policy to handle unreliable buyers for
GSCM. They have several buyers in different regions, but four buyers
are selected for this case study. Some data are similar to those of
the numerical example. The other data for the case study are pre-
sented in Table 5. The expected total profit of business coordination
is $81,176.13. This implies that the mathematical model can be ap-
plied in reality, which validates the present study. The manufacturer
shares 𝜙 = 0.43, i.e., 43% of the total profit with the buyers, which
is 𝜙(81, 176.13) = $34, 905.74 shares. Then, the manufacturer earns
$46,270.39 of the total profit. The results show that coordination policy
is more beneficial not only for the total GSCM profit, but also for the
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274

Table 4
Comparison between inventory shrinkage and misplacement.
Shrinkage rate Unreliability without RFID Reliability without RFID ETP
1% $83,196.69
2% $82,347.74
$84,894.58 $83,784.18
3% $81,498.80
4% $80,649.85
5% $79,800.91

Table 5
Parameters for the case study.
Parameters Values Parameters Values
(𝑝1 , 𝑝2 , 𝑝3 , 𝑝4 ) $(340, 360, 343, 361)/unit (𝑔𝑟 1 , 𝑔𝑟 2 , 𝑔𝑟 3 , 𝑔𝑟 4 ) $(3.5, 3.3, 3.0, 4.2)/unit
(𝜇1 , 𝜇2 , 𝜇3 , 𝜇4 ) (239, 236, 237, 238.5) unit (𝜁1 , 𝜁2 , 𝜁3 , 𝜁4 ) (0.5, 0.4, 0.3, 0.6)
(ℎ𝑟 1 , ℎ𝑟 2 , ℎ𝑟 3 , ℎ𝑟 4 ) $(0.61c, 0.77c, 0.25c, 0.29c)/unit/unit time (𝐶1 , 𝐶2 ) $(120, 70)/reader
(𝐿, 𝐵) (190, 170) meter 𝐶𝑘 9880 gallon
𝑢 $285/unit 𝑐 $55/unit

with respect to cost parameters on the scale of −50%, −25%, +25%, and
+50%. Changes in all parameters are similar as profit increases for cost
decrements and vice-versa. The variable transportation cost has a sig-
nificant effect on the total profit. As the per unit variable transportation
cost depends on the distance and collected used products, the reduction
of the per unit cost impacts profit maximization and vice-versa. For
50% decrements in the variable transportation cost, the profit increases
by 117.36%. The next two parameters are carbon tax and production
cost. Profit increases by 63.29% for 50% decrements in the carbon tax.
If the unit production cost decreases by 50%, the profit increases by
30.59%. However, the inventory holding cost is a sensitive parameter
for profit. A 50% increment in the unit holding cost increases the profit
by 0.076%, even though the changes are minor.

7. Insights of this study

This section provides some important implications to the industry

managers, both theoretical and numerical implications obtained from
the study.

7.1. Managerial insights

• Carbon emissions measurements and the corresponding limits of

Fig. 4. Changes in profit with respect to the percentage changes of parameters.
• Reliability within a GSCM is very important for the long life
players. Separately, the profit of the buyers is $68,673.98, and that of
the manufacturer is $16,631.59. The profit-sharing policy is beneficial
for both SCM players in this study, as the total non-coordination profit
is greater than the coordination profit. The profit-sharing policy is
adopted in the coordination policy to help the buyers gain profit by
sharing a percentage of the total profit.
• This study starts with the VMI policy within a GSCM; however,
6.5. Sensitivity analysis
Sensitivity analysis explains the effects of the changes in key pa-
rameters on the total profit. Fig. 4 shows changes in the total profit
carbon emissions are major environmental goals. This helps to
reduce GHG emissions, which are the main reason for global
warming and climate change. From the three scenarios of the
carbon tax, CAPT, and combined policy of carbon tax with CAPT,
it is clear that the proposed combined policy is much better than
the other two policies. If any industry tries to use any single
policy, the CAPT policy is recommended as the profit is much
more than the carbon tax. Even though the total emissions and the
associative carbon tax is less in the carbon tax policy, the profit
of the CAPT policy is relatively higher than the cost of the CAPT
policy. Even, if any industry seeks to earn more profit without
investing in emissions reduction and control, that is also possible.
But that scenario is strictly not recommended by any means.
of a business. Mutual understanding and loyalty between supply
chain players are some parameters for a successful business. This
study clearly emphasizes this fact; the numerical study and case
study provide unusual results regarding the relationship between
the coordination and non-coordination policies. Non-coordination
profitability is a characteristic of blockchain.
in the end, the results show that the blockchain concept is more
appropriate for this type of unreliable supply chain. This study
deals with information asymmetry; any time data can be changed
by the buyers. Blockchain uses the concept of encryption and

12
B. Sarkar and R. Guchhait
immutability such that once the data are recorded, it cannot
be undone. Thus, the issue of information unreliability can be
removed, and the manufacturer can receive the correct data. This
study recommends using the blockchain concept for data liability
within the supply chain.
• RFID implementation is used for the security of the inventory.
RFID scanning ensures product information. The real-time track-
ing system of RFID helps gather proper information about the
product. All input and exchange data are secured in the system
through blocks. Therefore, the industry manager can overcome
the unreliability of the profitability of the blockchain, which
ensures data encryption.
7.2. Theoretical insights
• Optimal values of the order quantity 𝑞𝑖∗ and service 𝑠∗𝑖 of buyer
𝑖 are found in Theorem 1 for the non-coordination policy. The
optimum values 𝑞𝑖∗ and 𝑠∗𝑖 are unique for a given set of values
and the corresponding profit of the buyer is the global maximum.
Unique solutions are obtained when the rate of changes of the
𝜕𝐸𝑇 𝑃 𝜕𝐸𝑇 𝑃
total profit of buyers 𝜕𝑞 𝑟 and 𝜕𝑠 𝑟 with respect to 𝑞𝑖 and 𝑠𝑖
𝑖 𝑖
is equal to zero, respectively. That is, these solutions are one and
only one set of solutions for Eq. (3) for a given set of input values.
• Proposition 1 represents that buyer 𝑖 receives a global maximum
profit for unique decisions, obtained in Theorem 1. Conditions
(𝑝𝑖 + 𝑔𝑟𝑖 )𝜎𝑖2 > 0 and 𝐼𝑖 + 2𝜁𝑖 > 0 establish the above fact of
global maximum profit as selling price, goodwill lost cost, service
investment, and customer satisfaction cost are positive.
• Theorem 2 gives unique solutions of order quantity and distance
of two RFID readers for Eqs. (11) and (12). Unique solutions are
found when the rate of change of total profit of the manufacturer
𝜕𝐿𝐸𝑇 𝑃𝑚1 𝜕𝐿𝐸𝑇 𝑃𝑚2 𝜕𝐿𝐸𝑇 𝑃𝑚
𝜕𝑞𝑖1
, 𝜕𝑞 , and 𝜕𝑑
with respect to decision variables
𝑖2
is equal to zero. The manufacturer obtains global maximum profit
in the non-coordination policy for the unique values of order
quantity and distance between RFID readers. The profit is the
maximum for a given set of values. Theorem 3 provides the
optimum value between 𝑞𝑖1 and 𝑞𝑖2 such that the total profit of
the manufacturer 𝐿𝐸𝑇 𝑃𝑚 becomes maximum.
• Proposition 3 represents that the manufacturer earns a global
maximum profit for unique decisions, obtained in Theorems 2
and 3. Conditions for global maximum are stated in Proposi-
tion 3 which shows that selling price, holding cost, goodwill
lost ⌈cost, ⌉service
⌈ ⌉ investment, customer satisfaction, and
[ ]
24𝑅2𝑠 √𝐿 √
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑏 ) must be greater than zero.
2𝑅𝑡 2𝑅𝑡
Of course, these parameters are positive.
8. Conclusions and future works
This study investigated the incorporation of RFID and environmen-
tal issues within a GSCM under the VMI system, affected by information
asymmetry. The emissions from all sectors of the GSCM were more than
the initial cap and the manufacturer brought an additional limit for
carbon emissions. The objective could not always be one directed at
profit maximization or emissions minimization. The results indicated
the effect of the blockchain concept in dealing with information asym-
metry. The non-coordination profits exceeded traditional coordination
profitability. Numerical analysis proved that the unreliability could be
controlled in two ways: information asymmetry could be removed by
blockchain transparency, and inventory safety could be assured by the
utilization of RFID. The optimum number of Type 1 and Type 2 read-
ers was determined using the appropriate investment strategy. Even
reverse logistics helped use the collected products for remanufacturing.
If the unreliability was considered without the RFID scanning facility,
then even under the 1% misplacement and 1% shrinkage inventory, the
system could not earn more profit than the profit obtained in this study.
13
Electronic Commerce Research and Applications 60 (2023) 101274
The system faced a loss under information asymmetry. Reliable buy-
ers could earn more profit in a large margin in both cases without RFID
and the services. Business ethics and liability could save extra invest-
ment to resolve the mistrust issue between the supply chain players. As
information flows from the market to the manufacturer, real informa-
tion sharing is key to long-term production business. Given that buyers
are the end players of the forward SCM, any incorrect and incomplete
information can make the entire system unstable. Thus, this study
finds a solution outline that would be helpful for an unreliable system.
Information asymmetry causes many unfruitful scenarios for profit.
Some are experienced in the numerical study. The results indicate
the benefit of combining the decentralized system with information
security.
This study did not specify the energy resources that amplify the
emissions from the system. The use of renewable energy resources
within the GSCM will maximize the profit of the system along with
the reduction of emissions which was one of the observations of this
study. A multi-objective optimization can be an immediate extension of
this study by choosing priority between the economy and environment.
The study can be extended by using the asymmetric power of SCM
players and solved using a game strategy. This study considered a
supply chain with a stochastic demand pattern; however, there was no
concept of third party within players. This indicates that this model
can be considered for further extension with a three-echelon supply
chain considering a third party, which can help either the manufacturer
or the buyer with transporting issues (Hota et al., 2022), collecting
reused materials (Sarkar et al., 2022b), or energy issues. Another
limitation of this model is the concept of a bill of materials (BOM)
for the material requirement planning (MRP). Detailed information
about the materials will be helpful for maintaining the information
transparency of blockchains. Thus, the extension can be considered
in the direction of the MRP under the direct effect of environmental
issues in the presence of RFID. However, the strategic cost for the
utilization of blockchain is slightly higher than that of the traditional
information sharing policy (Taleizadeh et al., 2022). This study can be
further extended by considering any other managerial strategic change
to obtain unreliable and reliable information provided by multiple
buyers (Vandana et al., 2023). This study can be extended by virtue of
the multi-echelon SCM (Debnath and Sarkar, 2023) and more improved
logistics policies for blockchain (Bamakan et al., 2020) and virtual
reality (Arghashi, 2022).
Acknowledgment
This work was supported by the Yonsei University Research Fund
(Post Doc. Researcher Supporting Program) of 2022 (Project number:
2022-12-0040).
CRediT authorship contribution statement
Biswajit Sarkar: Supervision, Conceptualization, Methodology,
Validation, Investigation, Resources, Review and editing, Funding
acquisition, Project administration. Rekha Guchhait: Writing –
original draft, Review and editing, Conceptualization, Methodology,
Software, Data curation, Formal analysis, Visualization.
Declaration of competing interest
The authors declare that they have no known competing finan-
cial interests or personal relationships that could have appeared to
influence the work reported in this paper.
Data availability
Sources have been provided in the manuscript.
B. Sarkar and R. Guchhait Electronic Commerce Research and Applications 60 (2023) 101274
⌈ ⌉⌈ ⌉
𝜕 2 𝐿𝐸𝑇 𝑃𝑚1 24𝑆𝑠2 𝐿 𝐵 [ ]
Appendix A = − √ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) < 0. This second-
𝜕𝑑 2 𝑑4 2𝑅𝑡 2𝑅𝑡
order derivative is less ⌈than ⌉zero,
⌈ as⌉ all terms multiplied by minus
𝜕𝐸𝑇 𝑃 𝑟 [ ]
Proof of Theorem 1. 𝜕𝑞𝑖
= 0, that is (𝑝𝑖 + 𝑔𝑟𝑖 ) − 2𝑢 − (𝑝𝑖 + are positive, i.e., 24𝑆𝑠2 √𝐿 √
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) > 0. Again,
𝑞𝑖 −𝜇𝑖 𝜎 𝛥1 2𝑅𝑡 2𝑅𝑡
𝑔𝑟𝑖 ) √ = 0, that is, 𝑞𝑖∗ = 𝜇𝑖 + √ 𝑖 𝜕 2 𝐿𝐸𝑇 𝑃𝑚1 𝜕 2 𝐿𝐸𝑇 𝑃𝑚1
𝜎𝑖2 +(𝑞𝑖 −𝜇𝑖 )2 1−𝛥21
𝜕𝑞𝑖 𝜕𝑑
= 0 = 𝜕𝑑𝜕𝑞𝑖
.
Therefore, the principal minor is less than
𝜕𝐸𝑇 𝑃 𝑟 2𝜁𝑖 −2𝑢+𝑔𝑟𝑖 +𝑝𝑖
= −𝐼𝑖 𝑠𝑖 + 2𝜁𝑖 (1 − 𝑠𝑖 ), i.e., 𝑠∗𝑖 = , and 𝛥1 = . zero, and thus, one can check the second order principal minors of
𝜕𝑠𝑖 𝐼𝑖 +2𝜁𝑖 𝑔𝑟𝑖 +𝑝𝑖 | 𝜕 2 𝐿𝐸𝑇 𝑃𝑚1 𝜕𝐿𝐸𝑇 𝑃𝑚1 |
| |
| 2 𝜕𝑞𝑖 𝜕𝑑 | 1 (ℎ𝑟𝑖 +𝑔𝑚 )𝜎𝑖 2 24𝑆𝑠2
( ) ( ) buyer 𝑖 as |𝐻22𝑖 | = | 2 𝜕𝑞𝑖 |= 2(
𝑔𝑟𝑖 +𝑝𝑖 𝜎𝑖2 𝑔𝑟𝑖 +𝑝𝑖 𝜎𝑖2 | 𝜕 𝐿𝐸𝑇 𝑃𝑚1 𝜕 2 𝐿𝐸𝑇 𝑃𝑚1 | ) 3 𝑑4
𝜕𝐸𝑇 𝑃𝑟 | | 𝜎𝑖2 +(𝜇𝑖 −𝑞𝑖 )2 2
Proof of Proposition 1. =− ( )3
< 0 i.e., ( )3 ⌈ ⌉⌈ ⌉ | 𝜕𝑑𝜕𝑞 𝑖 𝜕𝑑 2 |
𝜕𝑞𝑖2 [ ]
2 𝜎𝑖2 +(𝜇𝑖 −𝑞𝑖 )2 2 2 𝜎𝑖2 +(𝜇𝑖 −𝑞𝑖 )2 2 √
𝐿
√
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) > 0, because all terms are positive.
> 0. The second-order derivative is less than zero. The numerator 2𝑅𝑡 2𝑅𝑡
is positive because the goodwill loss cost, selling price, and standard The determinant value of the principal minor or order two is greater
deviation denominator, (𝜇𝑖 − 𝑞𝑖 )2 > 0; therefore, than zero. Hence, all principal minors alternate in sign. The 𝐿𝐸𝑇 𝑃𝑚1
( ) are positive. In the
( ) ( )
2 𝜕𝐸𝑇 𝑃𝑟 has a global maximum at the optimum points 𝑞𝑖1 and 𝑑⌈∗ . ⌉⌈ ⌉
𝑔𝑟𝑖 + 𝑝𝑖 𝜎𝑖 > 0. 2 = − 𝐼𝑖 + 2𝜁𝑖 < 0 that is, 𝐼𝑖 + 2𝜁𝑖 > 0. Both
𝜕𝑠𝑖
the investment and customer satisfaction are positive. Therefore, the Similarly, if (ℎ𝑟𝑖 + 𝑔𝑚 )𝜎𝑖 2 > 0 and 24𝑆𝑠2 √𝐿 √
𝐵

𝜕𝐸𝑇 𝑃 𝜕𝐸𝑇 𝑃 [ ] 2𝑅𝑡 2𝑅𝑡

first principal minor was less than zero. Again, 𝜕𝑞 𝜕𝑠 𝑟 = 0 = 𝜕𝑠 𝜕𝑑𝑟 . The 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑏 ) > 0 simultaneously, then 𝐿𝐸𝑇 𝑃𝑚2 is the global
𝑖 𝑖 𝑖
| 𝜕 𝐸𝑇 𝑃𝑟
2 𝜕𝐸𝑇 𝑃𝑟 | maximum based on the relatively higher profit between 𝐿𝐸𝑇 𝑃𝑚1 and
| |
| 𝜕𝑞𝑖2 𝜕𝑞𝑖 𝜕𝑠𝑖 | 𝐿𝐸𝑇 𝑃𝑚2 .
second principal minor of buyer 𝑖 is |𝐻22𝑖 | = | 𝜕 2 𝐸𝑇 𝑃 | ,i.e.,
| 𝑟 𝜕 2 𝐸𝑇 𝑃
𝑟 |
| 𝜕𝑠 𝜕𝑞 |
( ) | 𝑖 𝑖 𝜕𝑠 2
𝑖 | Appendix C
𝑔𝑟𝑖 +𝑝𝑖 𝜎𝑖2 ( )
|𝐻22𝑖 | = ( )3
𝐼 𝑖 + 2𝜁 𝑖 > 0. The determinant value of the
Proof of Theorem 4. The proof is similar to that of Theorem 2.
2 𝜎𝑖2 +(𝜇𝑖 −𝑞𝑖 )2 2
principal minor is positive. As the principal minors are alternating in 𝑔𝑟𝑖 +𝑔𝑚 +𝑝𝑖 −ℎ𝑟𝑖 −2[𝑐+(𝑐𝑡 +𝑆𝑐 ){𝑒1 +𝑒4 𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )}+𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )]
𝛥31 = ,
sign, this proves that the required results are the global maximum for ℎ𝑟𝑖 +𝑔𝑟𝑖 +𝑔𝑚 +𝑝𝑖
buyer 𝑖.
𝑔𝑟𝑖 +𝑔𝑚 +𝑝𝑖 −ℎ𝑟𝑖 −2[𝑐+(𝑐𝑡 +𝑆𝑏 ){𝑒1 +𝑒4 𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )}+𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )]
𝛥32 = ℎ𝑟𝑖 +𝑔𝑟𝑖 +𝑔𝑚 +𝑝𝑖
.
Appendix B
Proof of Proposition 3. For the subproblem 𝐿𝐸𝑇 𝑃1 , the second-
𝑚1 𝜕𝐿𝐸𝑇 𝑃 𝜕 2 𝐿𝐸𝑇 𝑃1
Proof of Theorem 2. From Eq. (11), = order derivatives with respect to the decision variables are =
⌈ ⌉⌈ ⌉ 𝜕𝑑 2 𝜕𝑞𝑖1
8𝑅2𝑠 𝐿 𝐵 [ ] (ℎ𝑟𝑖 +𝑔𝑟𝑖 +𝑝𝑖 +𝑔𝑚 )𝜎𝑖 2
−𝜆1 + 𝑑 3 √ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) . This implies that 𝜆1 = − 12 < 0. The first-order derivative is less than zero, as all
⌈ ⌉ ⌈ 2𝑅𝑡 ⌉ 2𝑅𝑡 ( )3
8𝑅2𝑠 𝐿 𝐵 [ ] 𝜎𝑖2 +(𝑞𝑖 −𝜇𝑖 )2 2
√ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) . Now, using the Khun-Tucker con-
𝑑3 𝜕 2 𝐿𝐸𝑇 𝑃1
2𝑅𝑡 2𝑅𝑡
√ ] terms are positive in sign. = −(𝐼𝑖2 +2𝜁𝑖 ) < 0. Investment and cus-
√ 3
log(1− 1−𝜃)
𝜕𝑠2𝑖
ditions, 𝜆1 > 0; then, 3 [𝜆− 𝜌
− 𝑑 = 0, i.e., 𝑑 ∗ = tomer satisfaction
⌈ ⌉⌈ ⌉ are positive.
[ ]
√ [ √3
log(1− 1−𝜃)
] 𝜕 2 𝐿𝐸𝑇 𝑃1
= −
24𝑅2𝑠
√
𝐿
√
𝐵
𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) < 0. All terms
3 𝜆− . This distance is the same for the two subproblems. 𝜕𝑑 2 𝑑4 2𝑅𝑡 2𝑅𝑡
𝜌
multiplied by the negative sign are positive separately. Thus, the mul-
𝜕𝐿𝐸𝑇 𝑃𝑚1
Now, 𝜕𝑞𝑖
= 21 (𝑔𝑚 − ℎ𝑟𝑖 ) + 𝑢 − 𝑐 − (𝑐𝑡 + 𝑆𝑐 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} − 𝜕 2 𝐿𝐸𝑇 𝑃 𝜕 2 𝐿𝐸𝑇 𝑃 𝜕 2 𝐿𝐸𝑇 𝑃
tiplication is negative in sign. 𝜕𝑞 𝜕𝑠 1 = 0 = 𝜕𝑠 𝜕𝑞 1 , 𝜕𝑠 𝜕𝑑 1 = 0 =
𝑞𝑖 −𝜇𝑖 𝜎𝛥 𝑖 𝑖 𝑖 𝑖 𝑖
𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) − √ (ℎ𝑟𝑖 + 𝑔𝑚 ), i.e., 𝑞𝑖1 = 𝜇𝑖 + √ 𝑖 2121 . 𝛥21 = 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃
2 𝜎12 +(𝜇𝑖 −𝑞𝑖 )2 1−𝛥1 𝜕𝑑𝜕𝑠𝑖
, 𝜕𝑞 𝜕𝑑 = 0 = 𝜕𝑑𝜕𝑞 1 . The first principal minor is negative.
𝑖 𝑖
2(𝑢−𝑐−(𝑐𝑡 +𝑆𝑐 ){𝑒1 +𝑒4 𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )}−𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 ))+𝑔𝑚 −ℎ𝑟𝑖 𝜕𝐿𝐸𝑇 𝑃𝑚2 1 Now, the calculation of the second principal minor of buyer 𝑖 is given
𝑔𝑚 +ℎ𝑟𝑖
. 𝜕𝑞𝑖
= 2 (𝑔𝑚 − ℎ𝑟𝑖 ) + | 𝜕 𝐿𝐸𝑇 𝑃1
2 𝜕 𝐿𝐸𝑇 𝑃1 |
2
| |
| | 1 (ℎ𝑟 +𝑔𝑟 +𝑔𝑚 +𝑝𝑖 )𝜎𝑖 [ 2 ]
𝑞 −𝜇 𝜕𝑞𝑖2
2
𝑢 − 𝑐 − (𝑐𝑡 + 𝑆𝑏 ){𝑒1 + 𝑒4 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 )} − 𝑉𝑡 (𝑙𝑚𝑖 + 𝛼𝑙𝑖𝑚 ) − √ 2 𝑖 𝑖 (ℎ𝑟𝑖 + by |𝐻22𝑖 | = | 𝜕2 𝐿𝐸𝑇
𝜕𝑞𝑖 𝜕𝑠𝑖
| = 2 (𝑖 𝑖 𝐼𝑖 + 2𝜁𝑖 > 0.
2 𝜎1 +(𝜇𝑖 −𝑞𝑖 )2 | 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 | )3
| 𝜕𝑠 𝜕𝑞 | 𝜎𝑖2 +(𝑞𝑖 −𝜇𝑖 )2 2
𝑔𝑚 ), i.e., 𝑞𝑖2 = 𝜇𝑖 + √
𝜎𝑖 𝛥21
. 𝛥22 = | 𝑖 𝑖 𝜕𝑠2𝑖 |
1−𝛥211
The value of the second principal minor is greater than zero, and
2(𝑢−𝑐−(𝑐𝑡 +𝑆𝑏 ){𝑒1 +𝑒4 𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 )}−𝑉𝑡 (𝑙𝑚𝑖 +𝛼𝑙𝑖𝑚 ))+𝑔𝑚 −ℎ𝑟𝑖 therefore, it has a positive sign. Now, one can check the third principal
𝑔𝑚 +ℎ𝑟𝑖
. | 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 |
| |
| 2 𝜕𝑞𝑖 𝜕𝑠𝑖 𝜕𝑞𝑖 𝜕𝑑 |
| 2 𝜕𝑞𝑖 |
| 𝜕 𝐿𝐸𝑇 𝑃1 2
𝜕 𝐿𝐸𝑇 𝑃1 𝜕 𝐿𝐸𝑇 𝑃1 |
2
Proof of Theorem 3. For 𝑞𝑖 = 𝑞𝑖1 , 𝐿𝐸𝑇 𝑃𝑚1 is optimum and the total minor of buyer 𝑖 as |𝐻33𝑖 | = | | =
| 𝜕𝑠𝑖 𝜕𝑞𝑖 2
𝜕𝑠𝑖 𝜕𝑠𝑖 𝜕𝑑 |
| 𝜕 2 𝐿𝐸𝑇 𝑃 |
profit is the maximum. For 𝑞𝑖 = 𝑞𝑖2 , 𝐿𝐸𝑇 𝑃𝑚2 requires the optimum | 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 |
| 𝜕𝑑𝜕𝑞 1
|
profit. Each subproblem attains a global maximum. As the problem is ( ⌈ ⌉⌈ ⌉| 𝑖 )𝑖
𝜕𝑑𝜕𝑠 𝜕𝑑 2
|
[ 2 ] 24𝑅2𝑠 𝐿 𝐵 [ ]
to find the global maximum of 𝐿𝐸𝑇 𝑃𝑚 , the optimum between 𝑞𝑖1 and − 𝐼𝑖 + 2𝜁𝑖 √ √ 𝐶 2 + 𝑒 (𝑐
4 𝑡 + 𝑆 𝑐 )
𝑑4 2𝑅𝑡 2𝑅𝑡
𝑞𝑖2 yields the global maximum. Hence, 2
1 (ℎ𝑟𝑖 +𝑔𝑟𝑖 +𝑔𝑚 +𝑝𝑖 )𝜎𝑖 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1 𝜕 2 𝐿𝐸𝑇 𝑃1
{ < 0. As < 0, < 0, and < 0,
2 ( )3 2
𝜕𝑞𝑖1 𝜕𝑠2𝑖 𝜕𝑑 2
𝑞𝑖1 , 𝐿𝐸𝑇 𝑃𝑚1 > 𝐿𝐸𝑇 𝑃𝑚2 ; 𝜎𝑖2 +(𝑞𝑖 −𝜇𝑖 )2 2
𝑞𝑖∗ =
𝑞𝑖2 , 𝐿𝐸𝑇 𝑃𝑚2 > 𝐿𝐸𝑇 𝑃𝑚1 . the multiplication of these three values is a negative value. The other
terms of the⌈ determinant
⌉⌈ ⌉ are zero. Therefore,
and 𝐿𝐸𝑇 𝑃𝑚 (𝑞𝑖∗ ) will be the maximum for the optimum 𝑞𝑖 . [ 2 ] 2 𝐿 𝐵 [ ]
𝐼𝑖 + 2𝜁𝑖 > 0, 24𝑅𝑠 √ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑐 ) > 0, and (ℎ𝑟𝑖 +
2𝑅𝑡 2𝑅𝑡
Proof of Proposition 2. The second-order derivatives of the profit 𝑔𝑟𝑖 + 𝑔𝑚 + 𝑝𝑖 )𝜎𝑖 2 > 0 simultaneously. Therefore, 𝐿𝐸𝑇 𝑃1 has the global
𝜕 2 𝐿𝐸𝑇 𝑃𝑚1 maximum for 𝑠∗𝑖 , 𝑞𝑖3 , and 𝑑 ∗ of buyer 𝑖. ⌉ ⌈
function 𝐿𝐸𝑇 𝑃𝑚1 with respect to 𝑞𝑖1 and 𝑑 are given by 2 = ⌈ ⌉
𝜕𝑞𝑖1 [ 2 ] 2 𝐿 𝐵 [ ]
(ℎ𝑟𝑖 +𝑔𝑚 )𝜎𝑖 2 Similarly, 𝐼𝑖 + 2𝜁𝑖 > 0, 24𝑅𝑠 √ √ 𝐶2 + 𝑒4 (𝑐𝑡 + 𝑆𝑏 ) > 0,
− 12 ( )3
< 0. The second-order derivative is less than zero 2𝑅𝑡 2𝑅𝑡
𝜎𝑖2 +(𝜇𝑖 −𝑞𝑖 )2 2 and (ℎ𝑟𝑖 + 𝑔𝑟𝑖 + 𝑔𝑚 + 𝑝𝑖 )𝜎𝑖 2 > 0 simultaneously. Hence, the maximum
as both the numerator and denominator are positive. The holding profit of 𝐿𝐸𝑇 𝑃 is global, and it is based on the greater profit between
cost and goodwill loss cost are positive. Hence, (ℎ𝑟𝑖 + 𝑔𝑚 )𝜎𝑖 2 > 0. 𝐿𝐸𝑇 𝑃1 and 𝐿𝐸𝑇 𝑃2 .

14
B. Sarkar and R. Guchhait
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