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

• The manufacturer investing in green product development (GPD) is dominating in the long term. • Investing GPD may not be optimal for both supply chain members in the short term. • Under certain conditions, the prices in the second period are lower than the first period. • The corresponding demand in the second period is always lower than the first period. • The products are greener when the manufacturer invests in GPD. 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. [ABSTRACT FROM AUTHOR]