Together we stand? Co-opetition for the development of green products

In this paper, we use the term “co-opetition” to describe situations where competitors collaborate on value-creating activities to reduce their R&D costs, improve expensive development processes, increase the effectiveness and efficiency of their green product development, and increase supply chain sustainability. We use a game-theoretic approach to see how co-opetition affects the price and environmental quality of green products and understand the impact on participating companies. By considering two common collaboration strategies, i.e. investment sharing and innovation sharing, and comparing them with a non-collaborative strategy, independent development, we are able to provide competing firms with managerial insights on the pros and cons of these collaboration strategies. We find that the innovation sharing strategy produces the most expensive products, as well as the products with the highest environmental quality. Additionally, we find that the independent development and investment sharing strategies can lead to products with inferior environmental quality, depending on the competitors’ demand sensitivity to their quality and price. When the consumers’ quality responsiveness is relatively greater than their price responsiveness, the independent development strategy should be avoided. Furthermore, the innovation sharing strategy provides the highest profits for the firm, whereas the independent development strategy leads to the lowest profits. Lastly, numerical experiments illustrate that the outcomes of collaborative strategies are robust under demand uncertainty, but not necessarily under nonlinear demand.