INFORMS ANNUAL MEETING 2017, Texas, United States Of America, 22 - 25 October 2017
We study a buyer’s strategies to incentivize environmental quality investment in a three-tier supply chain. Environmental quality of the end product depends on the environmental performances of both the tier 1 and the tier 2 supplier. A higher environmental quality produces an increased demand for the end product; and hence for the whole supply chain. In this setting, we compare the effectiveness of delegation vs. full control strategies from the buyer’s cost-sharing perspective.