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Conference Papers Year : 2021

Responsible Manufacturing with Information Disclosure Under Regulatory Inspections

Bin Shen
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Abstract

Different legislations are enacted to monitor and promote social sustainability performance. If any unsustainable manufacturing practice is found by the regulatory body, the firm will suffer from huge loss. As pressured by socially responsible purchasing and regulatory pressure, some manufacturing firms have begun to disclose social sustainability in their manufacturing process in audit reports periodically. In this paper, we examine how should a manufacturing firm choose its optimal socially-sustainable manufacturing effort, and how should the manufacturing firm set prices to successfully transmit social sustainability signals to first-stage consumers. We conduct a two-stage game-theoretic analysis to examine a manufacturing firm’s socially-sustainable manufacturing effort and dynamic pricing decisions under regulatory pressure. Consumers are classified into socially conscious and non-socially conscious consumers. We find that when the gap of consumer’s attitude towards responsibility is moderate, if the manufacturing firm insists on targeting both socially conscious and non-socially conscious consumers in the first period, consumers will believe that the firm is of low responsibility in manufacturing. Then in the second period when socially-sustainable manufacturing effort becomes a symmetric information, the belief that the manufacturing firm is irresponsible will hurt the manufacturing firm’s profit. Thus, it is beneficial to target at socially conscious consumers in the first period so as to transfer quality information to consumers. Our findings help a firm to wisely make socially-sustainable manufacturing effort decisions and set an informative price so as to transfer responsible manufacturing information to early consumers.
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hal-03806529 , version 1 (07-10-2022)

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Yifan Cao, Bin Shen. Responsible Manufacturing with Information Disclosure Under Regulatory Inspections. IFIP International Conference on Advances in Production Management Systems (APMS), Sep 2021, Nantes, France. pp.179-188, ⟨10.1007/978-3-030-85910-7_19⟩. ⟨hal-03806529⟩
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