To be or not to be green? Strategic investment for green product development in a supply chain

We study the strategic investment for green product development (GPD) in a supply chain. We develop a stylized two-period model in which either the retailer or the manufacturer could decide to invest in GPD in the second period. We find that the manufacturer investing in GPD is dominating because both supply chain members could earn more and the manufacturer could save more on the environmental tax. Under certain conditions, the prices are lower in the second period. However, the corresponding demand in the second period is always lower than the first period when the products become green.