Closing a supplier's energy efficiency gap through assessment assistance and procurement commitment

Jason Nguyen, Karen Donohue, Mili Mehrotra

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

This paper analyzes the energy efficiency (EE) investment decisions of a capitalconstrained manufacturer that competes with an alternative supplier for the business of a large industrial buyer. Through a series of game-theoretic models, we characterize when it is beneficial for the buyer to offer EE instruments, including assessment assistance and procurement commitment, and how these instruments interact with third-party assessment assistance to affect the supplier's EE investment level. We find that assessment assistance helps reduce the EE gap but procurement commitment is required to eliminate it.We also find that the availability of third-party assessment assistance reduces the buyer's incentive to offer both of its instruments, a scenario that potentially lowers the supplier's EE investment level. Our findings provide insights for buyers and policy makers interested in improving supply-chain EE.

Original languageEnglish (US)
Pages (from-to)122-138
Number of pages17
JournalManagement Science
Volume65
Issue number1
DOIs
StatePublished - Jan 2019

Keywords

  • Buyer-supplier interactions
  • Energy audit
  • Energy efficiency
  • Energy efficiency assessment
  • Supplier development
  • Supply chain sustainability

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