Economic and Environmental Implications of Introducing Green Own-Brand Products on E-Commerce Platforms

Abstract

This paper examines the impact of introducing a green own-brand product on an e-commerce platform, the incumbent competing sellers, and the environment. We develop a stylized model wherein a green seller and a non-green seller directly sell products to consumers through an e-commerce platform. The platform has the option to introduce its own-brand product and sell it within its marketplace. In scenarios where no brand introduction occurs, only two incumbents compete in the marketplace. However, with the introduction of the platform’s own brand, three products compete in the marketplace. Our findings reveal several noteworthy results. Firstly, the introduction of the platform’s own brand may diminish its profit, even when there are no development costs associated with the brand. Particularly intriguing is the observation that the platform’s profit may decrease as the product greenness of its own brand increases. Secondly, under certain conditions, both incumbent sellers can experience improved outcomes with the introduction of the platform’s green brand. Thirdly, while the platform’s green brand introduction does not invariably enhance the supply chain’s environmental performance, it may diminish it in instances where the base demand for the platform’s own brand is substantial and the eco-friendliness of the brand falls within a mid-range spectrum.

1. Introduction

It is increasingly common to observe e-commerce platforms, such as Amazon.com, JD.com, and Tmall.com, introducing their own/private brand products and retailing them within their marketplaces. Undoubtedly, these proprietary brands have achieved considerable success, yielding substantial economic benefits. More recently, a noteworthy trend has emerged where some e-commerce platforms are introducing and promoting green or environmentally friendly proprietary brand products. For instance, Tmall has unveiled its own green-brand product—an eco-friendly disposable paper cup—and is retailing it within its marketplace (https://baijiahao.baidu.com/s?id=1752014932828065425&wfr=spider&for=pc (accessed on 23 March 2024)). Additionally, Amazon has launched and is retailing “Aware”, a green brand featuring a range of consumer products (https://www.greenbiz.com/article/aware-inside-amazons-new-private-label-sustainable-goods (accessed on 23 March 2024)). Evidently, the impetus for e-commerce platforms to introduce and retail green proprietary brand products is grounded in social and environmental responsibility.

The phenomenon of e-commerce platforms introducing their own brands has been extensively studied in the literature [1]. Specifically, previous studies focus on competitive dynamics [2,3,4], market responses [5,6,7], and economic impact engendered by platforms’ own brand introduction [1,8,9,10]. However, to the best of our knowledge, no formal analysis of platforms introducing green brands has been conducted. Unlike the introduction of standard or non-green brands, the introduction of a green brand carries both economic and environmental implications, warranting a thorough investigation. This study addresses this gap by examining how the introduction of a platform’s green brand influences competition among incumbent sellers, as well as the profits of both sellers and the e-commerce platform. Additionally, it evaluates whether this introduction can enhance the environmental performance of the supply chain.

Thus, the purpose of this study is to explore the economic impacts of introducing green-brand products to these platforms on the stakeholders within the ecosystem, as well as their effects on the environment. Specifically, we aim to address the following research questions:

• Can the introduction of a green own brand generate higher profits for the e-commerce platform?
• How does the platform’s green brand introduction affect incumbent sellers on its marketplace? Furthermore, is it always beneficial to the environment?

To address these research questions, we have developed a stylized model that revolves around an established platform featuring two incumbent sellers. One seller offers a green product, while the other offers a non-green alternative. These sellers collaborate with the platform through an agency pricing model, wherein sellers establish retail prices for their products, and the platform levies a commission fee. We examine the following two scenarios: one without the introduction of a green brand, where only two incumbents vie within the platform’s marketplace, and another scenario with the introduction of a green brand, thereby featuring three competing products. Additionally, we incorporate the platform’s sunk costs associated with developing and producing its own-brand product into our analysis. Employing this framework, we determine equilibrium solutions for both scenarios and subsequently juxtapose the outcomes to discern the economic and environmental ramifications of the platform’s green brand introduction.

We have obtained some intriguing findings. Specifically, we discovered that the introduction of the platform’s green brand could potentially diminish its own profits, even in cases where there are no development costs associated with the brand. Furthermore, as the level of environmental friendliness of the platform’s own-brand product increases, its profit margin may decline. Additionally, we found that the impact on incumbent sellers and the environmental performance of the supply chain can vary significantly with the introduction of the platform’s green brand. Overall, our results provide understanding on the dual nature of the platform’s green brand introduction, presenting both opportunities and challenges for the platform itself, incumbent sellers, and environmental sustainability efforts. This study contributes to the literature on platform brand introduction by examining how the introduction of a platform’s own green brand affects the platform’s profits, the profits of incumbent sellers, and the environmental performance of the supply chain.

The rest of the paper is organized as follows: In Section 2, we review related studies. Then, we describe our model in Section 3. The equilibrium analysis and findings are given in Section 4. In Section 5, we conclude the paper.

2. Literature Review

Our study is mainly related to two streams of research. The first stream looks at platforms’ own brand (also known as store/private brand) introduction and examines competitive dynamics [2,3,4], market responses [5,6,7], and economic impact engendered by platforms’ own brand introduction [1,8,9,10]. In particular, to examine the competitive dynamics associated with platforms’ own brand introduction, Huang et al. (2022) [2] focus on the strategic factors that platforms and manufacturers need to consider when responding to consumer behavior and choosing their selling formats. They find that when using a reselling format, the platform may launch its own brand with a quality similar to that of the national brand, if the consumers are less strategic. Conversely, in an agency selling format, the platform may introduce its own brand with a quality profile different from that of the national brand. In addition, Tong and Xiao (2023) [4] focus on the sourcing strategies of dominant online platforms, revealing that asymmetric information about consumer acceptance might prevent the platform from partnering with national manufacturers and lead it to cooperate with a third-party manufacturer to produce its own brand.

The market responses engendered by the introduction of platforms’ own brands are a central theme in the literature [5,6,7]. To be specific, Xu et al. (2023) [6] discuss how the introduction of platforms’ own brands affects the logistics mode choices for sellers of fresh products, revealing that the presence of the platforms’ own brands increases the likelihood that sellers will opt for third-party logistics for their third-party stores rather than using platform logistics. In addition, Zhao et al. (2023) [7] explore how the retail platform’s own brand introduction influences the upstream manufacturer’s innovative strategies under reselling and agency modes and suggest manufactures may be able to prevent the introduction of platforms’ own brands by upgrading existing products under agency mode.

Research on the economic impact of platforms’ own brands is extensive [1,8,9,10]. Specifically, Cheng et al. (2023) [1] investigates how the introduction of the platform’s own-brand product affects existing sellers. They find that without regulation, the platform’s decisions regarding the introduction of its own brand and its pricing contract choices consistently disadvantage sellers. Additionally, the legislation that bans platforms from both providing a marketplace and participating in it compels the platform to use only the sell-to contract with its own brand introduction, which generally harms sellers in most market conditions. Li et al. (2021) [9] further investigate how introducing platforms’ own brands influences manufacturers, demonstrating that manufacturers can benefit from higher demand and wholesale prices when considering the investment effect. Specifically, when a platform introduces its own brand, it increases its investment, which, in turn, boosts demand and wholesale prices for manufacturers. Consequently, if the resulting competition remains relatively low, this investment effect outweighs the negative impact of competition, leading to improved outcomes for manufacturers and creating a win–win scenario.

Different from the prior studies, we focus on the platform’s introduction of a green own brand and explore how the green brand introduction affects the profits of the platform itself and incumbent sellers, as well as the environmental performance of the supply chain. In other words, we include both the economic and the environmental impact of platform’s own brand introduction in this study.

The second related stream is green or sustainable supply chain management. Due to the growing significance of corporate social responsibility and environmental sustainability, green supply chain management (GSCM) has garnered increasing focus in both academic research and industry practices [11,12,13,14,15]. A major topic in this field explores how to promote environmental performance in supply chain management, with a focus on manufactures and consumers [11,16,17,18,19,20,21]. For example, focusing on the strategic aspects that manufacturers and consumers can choose to improve environmental performance, Hong and Quo (2019) [11] examine the effects of different cooperation agreements on environmental performance within a green product supply chain. They show that collaboration among supply chain partners can enhance environmental outcomes, and heightened consumer awareness of green practices further boosts the advantages of cooperative agreements. Feng et al. (2022) [16] define green supply chain innovation (GSCI) as innovative practices employed by manufacturers that utilize digital technologies to improve the environmental efficiency of supply chain operations and to discuss how GSCI can improve environmental performance. Qin et al. (2023) [20] examine how limited resources should be distributed between corporate social responsibility activities within sustainable supply chains. The findings suggest that manufacturers should prioritize allocating more resources to environmental responsibility over community responsibility, as doing so has a greater impact on sustainability and operational efficiency. Zhu et al. (2023) [21] investigate how the altruistic preferences of e-commerce platforms influence manufacturers’ carbon emission reduction (CER) efforts within the e-commerce supply chain (ECSC). The study reveals that these altruistic preferences can positively impact CER, especially during the early stages of the ECSC.

The regulation and government support to promote environmental performance in supply chain management is also a central theme in the literature [22,23,24,25,26,27,28,29,30]. To be specific, Bian et al. [22] examine the impact of different subsidy policies—consumer subsidies versus manufacturer subsidies—on emission reduction and overall environmental performance. The findings indicate that consumer subsidies lead to higher net emissions and greater financial burdens on the government compared to manufacturer subsidies. He et al. [25] explore the effects of a non-monetary green product incentive (i.e., permission for single-occupancy vehicles to use high-occupancy vehicle lanes) on the demand for green versus non-green vehicles in the U.S. automobile industry. The research shows that while green product incentives are designed to increase the sales of eco-friendly vehicles, their removal can negatively impact sales if it leads to a significant loss of practical benefits. Wang et al. [28] explore the effectiveness of various subsidy mechanisms—such as subsidies for manufacturers’ eco-friendly product designs, retailers’ sales efforts, and consumer green consumption—intended to enhance environmental sustainability. The study finds that subsidizing manufacturers’ eco-friendly products and consumer green consumption is more effective than providing subsidies for retailers’ sales efforts.

In contrast to the existing studies, we explore whether the platform’s green brand introduction can be used as a measure to improve the environmental performance and make a clear contribution to this literature stream in uncovering when and how green brand introduction can improve the environmental performance of a supply chain consisting of two upstream sellers and one retail platform.

3. Model

We consider two sellers, A and B, selling products, A and B, directly to consumers via an established e-commerce platform, E, using the agency pricing model. The sellers set the product retail prices, $p_A$ and $p_B$, and the platform charges a commission fee, ${r p}_A$ and $r p_B$, where $0<r<1$ is the commission rate. The sellers compete in the same product category, and the levels of product greenness are $g_A$ and $g_B$. Without loss of generality, we assume $g_A>g_B\ge 0$. We normalize the marginal cost for the sellers to produce products to zero.

The e-commerce platform has the option to introduce its own-brand product E, and we identify the following two cases: a case without green brand introduction, in which only the two incumbents, A and B, compete in the marketplace, and a case with green brand introduction, in which three products, A, B, and E, compete in the marketplace. The greenness of product E is $g_E$, where $g_E>0$ is exogenously given. In other words, we assume that the cost for the platform to improve the product greenness is sunk. In addition, we normalize the marginal cost for the platform to produce product E to zero.

Subsequently, we describe the demand functions. We use a superscript N to denote the no-brand-introduction case, in which only two incumbents compete in the platform’s marketplace. We write the reduced demand structure as follows:

$$d_A^N={\displaystyle \frac{1}{2}}\left[1-p_A+k_{ps}\left(p_B-p_A\right)+g_A+k_{gs}(g_A-g_B)\right]$$

$$d_B^N={\displaystyle \frac{1}{2}}\left[1-p_B+k_{ps}\left(p_A-p_B\right)+g_B+k_{gs}(g_B-g_A)\right]$$

We use $k_{ps}$ and $k_{gs}$, respectively, to represent the relative sensitivity of a seller’s demand to changes to his competitor’s price and greenness compared to those of his own. That is, parameter $k_{ps}$captures the intensity of price competition and $k_{gs}$ captures the intensity of greenness competition between the incumbents. The base level demands of both products are normalized to one.

When the platform introduces its own-brand product and sells it in the marketplace, we use a superscript I to denote this scenario and write the demand as follows:

$$d_A^I={\displaystyle \frac{1}{2+a}}\left\{1-p_A+{\displaystyle \frac{1}{2}}\left[k_{ps}\left(p_B-p_A\right)+k_{pe}\left(p_E-p_A\right)\right]+g_A+{\displaystyle \frac{1}{2}}\left[k_{gs}(g_A-g_B)+k_{ge}(g_A-g_E)\right]\right\},$$

$$d_A^I={\displaystyle \frac{1}{2+a}}\left\{1-p_A+{\displaystyle \frac{1}{2}}\left[k_{ps}\left(p_B-p_A\right)+k_{pe}\left(p_E-p_A\right)\right]+g_A+{\displaystyle \frac{1}{2}}\left[k_{gs}(g_A-g_B)+k_{ge}(g_A-g_E)\right]\right\},$$

$$d_E^I={\displaystyle \frac{1}{2+a}}\left\{1-p_E+{\displaystyle \frac{1}{2}}{k}_{pe}\left[\left(p_A-p_E\right)+\left(p_B-p_E\right)\right]+g_E+{\displaystyle \frac{1}{2}}{k}_{ge}\left[(g_E-g_A)+(g_E-g_B)\right]\right\}.$$

Parameter $k_{pe}$ ($k_{ge}$) measures the intensity of price (greenness) competition between the platform’s own-brand product and the incumbents’ brand products. The base demand level for the platform’s own brand is $a$, where $a>0$.

Model Simplifications

To obtain analytical solutions, we make some simplifications hereafter, including $g_A=1$, $g_B=0$, $k_{ps}=1$, $k_{gs}=1$, and $k_{pe}=1$; then, there are only four parameters—the platform’s commission rate, $r$; the greenness and base demand level of the platform’s own-brand product, $g_E$ and $a$; and the degree of competition in product greenness between the platforms’ and the incumbents’ brands, $k_{ge}$. Further, we use $g$ and $k$ to directly represent $g_E$ and $k_{ge}$. Further, since $g_A=1$ and $g_B=0$, we name seller A as the green seller and seller B as the non-green seller. Therefore, our primary objective is to investigate how the platform’s introduction of green-brand products influences price competition between the green seller and the non-green seller. By employing these simplifications, we create a specialized case that encapsulates the fundamental trade-offs inherent in the narrative. The results obtained from this simplified model remain qualitatively robust even when these simplifications are relaxed.

4. Analysis

In this section, we examine the case in which the platform does not introduce its own brand and only two incumbents compete in the platform’s marketplace (case N), as well as the case in which the platform introduces its own brand and three products compete in the marketplace (case I). We first derive the equilibrium solutions and profits in both cases, after which we perform an equilibrium comparison and reveal the impacts of introducing a green-brand product on the platform, incumbent sellers, and the environment.

4.1. Equilibrium in the Case of No Brand Introduction (Case N)

In this case, given the commission rate $r$, two sellers determine their own optimal retail prices, $p_i$, $i\in \left\{A,B\right\}$, simultaneously to maximize their profits:

$$\underset{p_i}{\max }{\pi }_i=\left(1-r\right) {p_i d}_i$$

Solving the above problem, we have the following result.

Lemma 1. 

In the case of no brand introduction, the sellers’ equilibrium retail prices are $p_A^N={\displaystyle \frac{4}{5}}$ and $p_B^N={\displaystyle \frac{1}{5}}$.

It is straightforward that the green seller charges a larger retail price than the non-green seller, i.e., $p_A^N>p_B^N$. Using Lemma 1, we compute the sellers’ and the platform’s equilibrium profits in the case of no green brand introduction as follows:

$${\pi }_A^N={\displaystyle \frac{16}{25}}\left(1-r\right),{\pi }_B^N={\displaystyle \frac{1}{25}}\left(1-r\right),{\pi }_E^N={\displaystyle \frac{17}{25}}r.$$

4.2. Equilibrium in the Case of Green Brand Introduction (Case I)

In case I, three products compete in the market. The e-commerce platform and two sellers determine their optimal retail prices simultaneously to maximize their profits, as follows:

$$\underset{p_E}{\max }{\pi }_E=p_E d_E+r({p_A d}_A+{p_B d}_B),$$

$$\underset{p_i}{\max }{\pi }_i=\left(1-r\right) {p_i d}_i, i\in \left\{A,B\right\}.$$

Solving the above problem, we have Lemma 2.

Lemma 2. 

In the case of brand introduction, the platform’s and the sellers’ equilibrium retail prices are $p_E^I={\displaystyle \frac{6+14a-6k+6r+k r+2g(7+6k-k r)}{54-2r}}$, $p_A^I={\displaystyle \frac{18(a+g-3gk+3(6+k\left)\right)-(4+k)r}{18(27-r)}}$, and $p_B^I={\displaystyle \frac{18(6+a+g-3gk)+(4+k)r}{18(27-r)}}$.

Using Lemma 2, we compute the sellers’ and the platform’s equilibrium profits as

$${\pi }_A^I={\displaystyle \frac{(1-r){(324+18a+18g+54k-54gk-4r-kr)}^2}{162(2+a){(27-r)}^2}}, {\pi }_B^I={\displaystyle \frac{(1-r){(108+18a+g(18-54k)+4r+kr)}^2}{162(2+a){(27-r)}^2}},$$

and

$${\pi }_E^I={\displaystyle \frac{\begin{array}{c}81\left(27-r\right)\left(4\left(3+7a-3k+g\left(7+6k\right)\right)-\left(12+2a+2g\left(1-k\right)+k\right)r\right)\left(6+14a-6k+6r+kr+2g\left(7+6k-kr\right)\right)\\ +(54-2r)r({\left(18\right(6+a+g-3gk)+(4+k\left)r\right)}^2+{(-18(a+g-3gk+3(6+k))+(4+k\left)r\right)}^2)\end{array}}{324(2+a){(27-r)}^3}}$$

Subsequently, we examine how the equilibrium retail prices and profits change as the product greenness of the platform’s own brand ($g$) increases, and report the results as follows.

Proposition 1. 

When the product greenness of the platform’s own brand increases, i.e., $g$ increases,

• the equilibrium price of the platform’s own-brand product increases; that is, ${\displaystyle \frac{\partial p_E^I}{\partial g}}>0$;
• the equilibrium prices of the incumbent brand products increase when $k<{\displaystyle \frac{1}{3}}$ and decrease when $k>{\displaystyle \frac{1}{3}}$; that is, ${\displaystyle \frac{\partial p_A^I}{\partial g}}>0$ and ${\displaystyle \frac{\partial p_B^I}{\partial g}}>0$ when $k<{\displaystyle \frac{1}{3}}$, and ${\displaystyle \frac{\partial p_A^I}{\partial g}}<0$ and ${\displaystyle \frac{\partial p_B^I}{\partial g}}<0$ when $k>{\displaystyle \frac{1}{3}}$;
• the incumbent sellers’ equilibrium profits increase when $k<{\displaystyle \frac{1}{3}}$ and decrease when $k>{\displaystyle \frac{1}{3}}$; that is, ${\displaystyle \frac{\partial {\pi }_A^I}{\partial g}}>0$ and ${\displaystyle \frac{\partial {\pi }_B^I}{\partial g}}>0$ when $k<{\displaystyle \frac{1}{3}}$, ${\displaystyle \frac{\partial {\pi }_A^I}{\partial g}}<0$ and ${\displaystyle \frac{\partial {\pi }_B^I}{\partial g}}<0$ when $k>{\displaystyle \frac{1}{3}}$;
• the platform’s equilibrium profit first decreases and then increases; that is, when ${\displaystyle \frac{\partial {\pi }_E^I}{\partial g}}<0$ for $g<g^{\prime }$ and ${\displaystyle \frac{\partial {\pi }_E^I}{\partial g}}>0$ for $g>g^{\prime }$, where $g^{\prime }={\displaystyle \frac{8(3+7a-3k)(7+6k)+r(186-545k-60k^2-2a(6+37k\left)\right)-r^2(6-k(17+2a+2k\left)\right)}{4r(3+(37-30k\left)k\right)-4(1-k)k{r}^2-8{(7+6k)}^2}}$.

We understand the above results point by point. First, it is straightforward that the platform chooses to increase $p_E^I$ when the product greenness of its brand ($g$) increases. Regarding incumbents, the increase in has two impacts—a direct impact that pushes them to decrease the retail prices since their competitor’s product greenness increases, and an indirect impact that pushes them to increase the retail prices since their competitor’s product retail price ($p_E^I$) also increases. Thus, when the competition intensity in product greenness is weak (i.e., $k<1/3$), the indirect impact dominates the direct impact and sellers choose to increase the retail prices; when $k>1/3$, the direct impact is dominated and they choose to decrease the retail prices.

Next, we look at profits. Since the sellers may either choose to increase or to decrease the retail prices, it is easy to estimate that their equilibrium profits may also increase or decrease as g increases.

It is interesting that the platform’s equilibrium profit may decrease as $g$ increases. When introducing and selling an own-brand product, the platform has two revenue resources—the commission profit paid by the sellers and the product-selling profit paid by consumers. As $g$ increases, the product-selling profit always increases, but the commission profit may decrease. Further, we can verify that it needs a large $k$ to ensure $g^{\prime }>0$ (we can verify that when $k$ is small, $g^{\prime }<0$; then, the platform’s profit always increases as $g$ increases). Thus, it is easy to understand Point 4 in Proposition 1. When $k$ is large, as $g$ increases, the incumbent sellers’ equilibrium profits decrease, then the platform’s commission profit decreases. In summary, the increase in $g$ brings two opposite effects to the platform. When $g$ is in a small region, the product-selling profit is small, and the impact on the commission profit is dominated; thus, when $g$ increases, the platform’s profit decreases. When $g$ is in a large region, the impact on the product-selling profit is more salient; thus, when $g$ increases, the platform’s profit increases. Altogether, as $g$ increases, the platform’s equilibrium profit first decreases and then increases.

4.3. Impacts on the Platform

By comparing the platform’s equilibrium profits in case N and case I, we have the following result.

Proposition 2. 

The green brand introduction increases the platform’s profit when (1) $a<a_1$, or (2) $a>a_2$, or (3) $a_1<a<a_2 and g<g_1$, or (4) $a_1<a<a_2$ and ${g>g}_2$, and decreases the profit when $a_1<a<a_2 and g_1<g<g_2$. The expressions of $a_1$, $a_2$, $g_1$, and $g_2$are given in Appendix A.

It is interesting that the platform’s green brand introduction does not always increase its profit although there is no cost for the platform to develop the brand. As illustrated in Figure 1, the green brand introduction would shrink the platform’s profit when both the base demand and greenness of the platform’s own-brand product are middle (i.e., $a_1<a<a_2$ and $g_1<g<g_2$; Region R4 in Figure 1).

Overall, there are two effects caused by the platform’s introduction of its own brand. On the one hand, it brings a new revenue source to the platform, which boosts platform profit. We name it as the new-revenue-source-adding effect. On the other hand, the platform’s brand introduction would shift the price competition between incumbent sellers and urge them either to increase or decrease the retail prices, which may shrink platform profit. We name this effect as the competition-shifting effect.

When the base demand is very small (i.e., $a<a_1$; Region R1 in Figure 1), the new-revenue-source-adding effect is weak and the competition-shifting effect is dominated. Since we can verify $p_i^I>p_i^N$, $i\in \left\{A,B\right\}$, when $a<a_1$ (that is, the platform’s brand introduction pushes incumbent sellers to increase retail price), the competition-shifting effect becomes competition-decreasing; thus, it boosts platform profit. When the base demand is very large (i.e., $a>a_2$; Region R5 in Figure 1), the new-revenue-source-adding effect is more salient and the platform’s profit is higher with the introduction.

When the base demand is in a middle region (i.e., $a_1<a<a_2$), if $g$ is very small (Region R3 in Figure 1) or very large (Region R2 in Figure 1), the price competition between products is weak; in that sense, the new-revenue-source-adding effect dominates over the competition-shifting effect, and the platform’s profit is higher with the green brand introduction. However, if $g$ is in a middle region (Region R4 in Figure 1), the platform’s brand introduction causes a strong price competition, and the competition-shifting effect becomes competition-increasing; that is, sellers would decrease their retail prices, and the platform will obtain less commission profit. Then, the platform’s profit is lower with the green brand introduction.

4.4. Impacts on Incumbent Sellers

By comparing the incumbent sellers’ equilibrium profits in case N and case I, we have Proposition 3.

Proposition 3. 

(a) The platform’s green brand introduction increases the incumbent green seller’s (seller A’s) profit when $g<g_3 or {g>g}_4$, and decreases the incumbent green seller’s profit when $g_3<g<g_4$;

(b) The platform’s green brand introduction increases the incumbent non-green seller’s (seller B’s) profit when $g<g_5 or {g>g}_6$, and decreases the incumbent green seller’s profit when $g_5<g<g_6$. The expression of $g_3$, $g_4$, $g_5,$and $g_6$are given in Appendix A.

Proposition 3 shows that the platform’s green brand introduction can bring more profits to incumbent sellers. More interestingly, when the product greenness of the platform’s own brand ($g$) is very small or very large, both sellers are better off with the green brand introduction. The competition-shifting effect plays a key role; when $g$ is very small or very large, the platform’s green brand introduction softens the competition between incumbent brands, and the sellers increase the retail prices to obtain more profits. However, when $g$ is middle, the platform’s green brand introduction strengthens the competition between brand, and the sellers decrease the retail prices and are worse off.

4.5. Impacts on the Environment

Following on related studies [11,13], in this study, we use the environmental performance of the supply chain to measure the impacts of the platform’s brand introduction on the environment, which is formulated as follows:

$$\begin{array}{c}\hfill {EP}^N={g_{A}d}_A^N+{g_{B}d}_B^N,\\ \hfill {EP}^I={g_{A}d}_A^I+{g_{B}d}_B^I+{g_{E}d}_E^I.\end{array}$$

We report the impacts of the platform’s brand introduction on the environment as follows.

Proposition 4. 

The platform’s green brand introduction increases the environmental performance when $a<a_3$, or when $a>a_3 and g<g_7 or {g>g}_8$, and decreases the environmental performance when $a>a_3 and g_7<g<g_8$. The expression of $a_3$, $g_7$, and $g_8$ are given in Appendix A.

Proposition 4 demonstrates that the platform’s green brand introduction does not always improve the supply chain’s environment performance; it reduces the environmental performance when the base demand is large and the product greenness is middle. The key reason for this is that under some conditions, the platform’s green brand introduction urges the incumbent green seller to increase its retail price, which leads to a smaller number of green purchases by consumers and a worse environmental performance.

5. Conclusions

In this paper, we develop a stylized model to study both the economic and the environmental impact of the platform’s green brand introduction. Our investigation has yielded several noteworthy findings. Firstly, we observed that the introduction of a green brand may lead to a reduction in the platform’s profit, with the platform’s profitability potentially declining further as the environmental friendliness of its own brand increases. Secondly, under certain circumstances, both incumbent sellers may experience improved outcomes following the platform’s green brand introduction. Thirdly, it is crucial to note that the introduction of the platform’s green brand does not invariably enhance the environmental performance of the supply chain; in fact, it may even diminish environmental performance in cases where the base demand for the platform’s own brand is substantial and the product’s greenness is moderate. In summation, our findings underscore the dual nature of the platform’s green brand introduction, highlighting its potential as a double-edged sword impacting the platform itself, incumbent sellers, and environmental sustainability efforts.

5.1. Theoretical Contributions

This study examines both the economic and the environmental impact of the platform’s green brand introduction. On the one hand, it contributes to the literature on platform brand introduction by examining how the introduction of a platform’s own green brand affects the platform’s profits and the competition and profits of incumbent sellers. On the other hand, by exploring whether the platform’s green brand introduction can be used as a measure to improve the environmental performance, it makes a clear contribution to the sustainable supply chain literature in uncovering when and how the green brand introduction can improve the environmental performance of a supply chain consisting of two upstream sellers and one retail platform.

5.2. Managerial Implications

Firstly, our findings hold crucial implications for e-commerce platforms. It is imperative for platforms to recognize that the introduction of a green brand may lead to a contraction in their profits. Additionally, when contemplating the introduction of a green brand, platforms should be wary that opting for a brand with moderate product greenness could yield unfavorable outcomes. Secondly, our results extend implications to incumbent sellers. In certain scenarios, incumbent sellers may find it advantageous to embrace the platform’s green brand introduction and adjust their retail prices accordingly to navigate this new competitive landscape. Thirdly, our study offers insights for social planners. As elucidated in our analysis, the platform’s green brand introduction has the potential to either enhance or diminish environmental performance. While improvements in environmental performance may occur naturally under specific conditions, it is noteworthy that in many instances, the introduction of the platform’s green brand could lead to a reduction in the environmental performance of the supply chain. In such cases, social planners may need to intervene by either preventing the platform’s green brand introduction altogether or by imposing restrictions on the product greenness associated with the brand introduced by the platform. These measures could serve to safeguard environmental sustainability in the face of evolving e-commerce dynamics.

5.3. Limitations and Future Research Opportunities

As pioneers in examining both the economic and environmental ramifications of e-commerce platforms’ green brand introduction, our study utilizes a stylized model and incorporates certain simplifications to elucidate the key trade-offs involved. While these simplifications facilitate a focused analysis, future studies could explore the impacts of various parameters by relaxing these assumptions. For instance, it is an interesting direction to endogenize sellers’ product greenness investment decisions. Moreover, our manuscript exclusively focuses on the agency pricing model. However, a promising avenue for future research involves analyzing the wholesale pricing model and contrasting the outcomes with those derived from the agency pricing model in a subsequent study. In addition, investigations that delve into the competition dynamics between e-commerce platforms hold promise for uncovering more intricate findings. By considering the competitive landscape among e-commerce platforms, future studies can shed light on additional dimensions of the impact of green brand introduction within the e-commerce ecosystem. Lastly, the presented model is theoretical and has not been tested or confirmed under real conditions. Future research needs to empirically test the proposed model.