Author's Accepted Manuscript

Developing green purchasing Relationships

for the manufacturing industry: An evolutionary game theory perspective
Ping Ji, Xin Ma, Gang Li

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http://dx.doi.org/10.1016/j.ijpe.2014.10.009
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Int. J. Production Economics

Received date: 27 March 2014

Revised date: 1 September 2014
Accepted date: 20 October 2014
Cite this article as: Ping Ji, Xin Ma, Gang Li, Developing green purchasing
Relationships for the manufacturing industry: An evolutionary game theory
perspective, Int. J. Production Economics, http://dx.doi.org/10.1016/j.ijpe.2014.10.009
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Article Title
Developing Green Purchasing Relationships for the Manufacturing Industry: An Evolutionary
Game Theory Perspective

Journal name
International Journal of Production Economics

The full names and details of all co-authors of the paper

Ping Jia, Xin Maa, Gang Lib
a
Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University,
Hung Hom, Kowloon, Hong Kong
b
School of Management, Xi'an Jiaotong University, Xi'an, China

Acknowledgements
The authors are grateful for the useful comments and suggestions made by two peer reviewers.
The authors acknowledge The Hong Kong Polytechnic University for the financial support of the
project (G-RTES). The work described in this paper was also supported by one grant from the
National Nature Science Foundation of China (Project No. NSFC 61174171).



Developing Green Purchasing Relationships for the Manufacturing Industry:

An Evolutionary Game Theory Perspective
Green purchasing plays an increasingly significant role in todays supply chain
management. Recycling, as a key factor in sustainable development, is seriously
considered by many manufacturers during the process of procurement. In order to
establish long-term green purchasing relationships between multi-stakeholders
(suppliers and manufacturers), in this study the supplier selection concept model
suggested by de Boer is updated, and an evolutionary game model is developed to
observe the cooperation tendency of multi-stakeholders. The newly proposed game
model intensively studies the trade behavior which can be realized as strategies and
payoff functions of the suppliers and manufacturers. In addition, a replicator dynamic
system is formulated to study evolutionarily stable strategies of multi-stakeholders. To
verify the theoretical results, simulation experiments are conducted with meaningful
results: the manufacturing industry can form the patterns of sustainable development,
and the recycling capability of suppliers directly determines how green a supply chain
is. The results can guide stakeholders to make better decisions in the future.

Keywords: Green supply chain management; Supplier relationship management;

Evolutionary game theory; Evolutionarily stable strategy; Multi-stakeholders

1. Introduction
In the era of the low carbon economy, the conflicts between environmental
management and economic development have been intensified. Traditionally, supplier
selection criteria are quality, delivery on time, price, risk, safety, manufacturing
capability, flexibility, reputation, etc. (Dickson, 1966; Weber et al., 1991; Ravindran et
al., 2010; Ho et al., 2010). Currently, customers are increasingly concerned about
purchasing environmental products. Supplier relationship management, as a vital part
of supply chain management (SCM), has to adopt green criteria to satisfy the
requirements of customers and improve the green degree in SCM.
As a pioneer, Bloemhof et al. (1995) pointed out the value of operations research

models to solve environmental issues. Jeremy (2000) suggested that the relationships
between buyers and suppliers play an important role during the decision process,
which also could motivate the environmental changes within the supply chain. Based
on the triple bottom lines, Hollos et al. (2012) conducted an investigation on Western
European firms. The results showed that sustainable supplier co-operation could bring
positive effects on the firms performance in three aspects: social, environmental and
economic. In the evolution processes of green supply chain management (GSCM),
many researchers emphasized on green purchasing (Lu et al., 2007; Bai and Sarkis,
2010; Zhou et al., 2012; Genovese et al., 2013). In practice, recycling and
remanufacturing are taken as a significant operation strategy for a manufacturer (or a
buyer) to select proper raw materials (products). For instance, Hewlett-Packard
Development Company (HP) has executed a product return and recycling program for
various products all over the world. After using these products, HP provides the
additional services (free delivery to HP) to motivate the environmental protection of
consumers awareness.
Given above brief introduce and the practical example, the green supplier
relationship management with recycling becomes a significant research topic. In the
academic field, however, existing researches just focus on one-time evaluation, and
few of them can further evaluate the possibility of cooperation between suppliers and
buyers after the procurement cycle. Besides, to improve the environmental protection
of the upstream companies in a supply chain, both suppliers and manufacturers have
responsible to work together.
In order to gain deeper insight on the issue of green purchasing relationship, from
game theoretical perspective, this paper adopts Evolutionary Game Theory (EGT) to
cast new light on this issue. Based on the philosophy of GSCM, a novel game model
is proposed to take full considerations of two aspects: recycling different kinds of
material wastes from manufacturer, and focusing on the cooperation tendency of
relationship between buyers and suppliers after a procurement cycle is completed.
The remainder of this paper is arranged as follows. Section 2 presents a literature
review from three aspects: traditional evaluation criteria, green supplier relationship

management models, and EGT applications. In Section 3, a game model is formulated

to study the green procurement relationship (GPR) in the manufacturing industry.
Based on the payoff matrix and the replicator dynamic system, two theorems are
proven for analyzing the evolutionarily stable strategy (ESS). Simulation experiments
are conducted to verify the ESS in Section 4. Finally, conclusions and suggestions are
provided in Section 5.

2. Literature review
In GSCM, green supplier relationship management has attracted attention from
many scholars during the past twenty five years. The literature review section consists
of three parts: traditional evaluation criteria, methods applied in green supplier
relationship management, and the applications of EGT models.
2.1 Traditional evaluation criteria
In supply chain management, supplier evaluation and selection, as one of the key
areas, has attracted the attention of many scholars during the past half century.
Dickson (1966), a pioneer in this field, conducted a survey on the factors that affect
decision making in selecting suppliers, based on questionnaires. He concluded there
were 23 different criteria, including quality, net price, delivery, warrant and policy,
performance, production facilities and capacity and so forth. Weber et al. (1991)
reviewed 74 relevant papers published since 1966 and gave special attention to the
supplier evaluation criteria. In response to the interest of the impact of just in time
on supplier selection, they identified price, delivery, quality, technology capability, etc.
as key factors.
During the past decades, supplier selection has been studied extensively, in which
criteria and decision techniques are two significant aspects. Based on decision making
theory, de Boer et al. (2001) took sustainable factors as the starting point to categorize
and evaluate the decision models. They built a framework which combined the
industrial market purchasing models from Faris et al. (1967) and Kraljic et al. (1983).
The framework considered different types of procurement situations, including
first-time buys, modified buys, and straight buys. The framework also described four

basic decision phases in supplier selection processes: problem formulation,

formulation of criteria, qualification and final selection. However, after the final
selection phase and the one-time purchasing decision, the buyers should evaluate the
cooperation with the suppliers for next-time purchases. The results from this
evaluation can help buyers to observe the tendency of suppliers strategies and make
better preparations for the coming procurement cycle. So, a new step, further
evaluation, is added to de Boers decision model, as shown in Figure 1. This new
conceptual decision model for supplier evaluation is a closed-loop assessment, rather
than an open one.

Figure1. The updated decision concept model for supplier evaluation

Ho et al. (2010) surveyed over 60 papers, and pointed that the most used
individual decision technique is data envelopment analysis (DEA) and quality is the
most popular criterion. Meanwhile, Bhattacharya et al. (2010) put forward evaluation
criteria from both the engineering requirements and the customer requirements
aspects. Kumaraswamy et al. (2011) adopted similar evaluation criteria.
From the above brief review, it is noticed that early criteria neglected the
influences which are generated by environmental protection. Recently, with the
increasing awareness of environmental protection, green criteria should be considered
in supplier selection. The study of green supplier selection and evaluation only began
to appear in depth in recent years.
2.2 Green supplier selection methods
In order to fully reflect the multi-objective (criteria) nature of green supplier
selection and evaluation, many scholars studied this subject from both qualitative and
quantitative aspects.
Noci (1997) firstly proposed a green supplier evaluation system which
incorporated green capability to improve environmental efficiency. Many methods
were since developed from both qualitative and quantitative aspects.
Kuo and Wang et al. (2010) developed a hybrid model which integrated artificial
neural network (ANN) and two multi-attribute decision analysis (MADA) methods 

DEA and analytic network process (ANP). The models were applied to help a camera
manufacturer to select proper green suppliers, and the results from the models
indicated that the ANN-DEA method was superior to the ANP-DEA. Zhou et al.
(2012) proposed an integrated method by combining ANP and the radial basic
function (RBF) neural network to select a green supplier for the chemical industry.
Meanwhile, Bykzkana G. (2012) used a fuzzy analytic hierarchy process (AHP)
model to calculate the relative weights of the criteria, and an axiomatic design
(AD)-based fuzzy group decision-making method to evaluate green supplier selection.
Kannan et al. (2013) integrated the fuzzy AHP with multi-objective linear
programming to select the best green supplier and calculate the order allocation issue.
In the green supplier selection model, eco-design was taken as an independent
criterion for the environmental competency aspect. The main objective of eco-design
is recycling or recovery of materials. Recently, Dou et al. (2014) presented a grey
ANP-based model to implement green supplier development programs. As to the
environmental criteria, they fully followed the environmental factors from Klassen
and Whybark (1999) and Gauthier (2005). Moreover, Bhattacharya et al. (2014)
adopted a fuzzy ANP-based balanced scorecard method to measure the green
performance of a supply chain. A comprehensive green criteria was suggested from
eco-design, green supplychain processes, and sustainable performance.
Using the Decision-making Trial and Evaluation Laboratory (DEMATEL)
approach, Hsu et al. (2013) developed a supplier selection framework, which mainly
integrated three dimensions (planning, implementation, and management) and
included thirteen sub-criteria from the carbon emission aspect. In the meantime, Mavi
et al. (2013) adopted a more complicated model  the Fuzzy Logic DEMATEL to
identify green suppliers. They took reverse logistics as an evaluation dimension
including remanufacturing, recycling, and taking back packaging. Similarly, Fu et al.
(2012) introduced a grey-based DEMATEL model to evaluate green supplier
development programs. Shen et al. (2013) adopted fuzzy TOPSIS (Technique for
Order of Preference by Similarity to Ideal Solution) to evaluate green suppliers.
TOPSIS was initially suggested by Hwang (1981). Kannan et al. (2014) also

developed a green supplier evaluation framework for a Brazilian electronics company.

Their results also showed that product design or eco-design (recycle materials or
components) was one of the dominant criteria. Zhao and Guo (2014) proposed a
hybrid fuzzy entropy and TOPSIS model for selecting the best green supplier.
Chiou et al. (2011) conducted a questionnaire-based survey in eight industry
sectors in Taiwan, and suggested that a supplier, by green innovation, could improve
its competition power and benefit the environment. Wong et al. (2012) conducted an
empirical investigation from the perspective of green operations. On the other hand,
focusing on the firm-level viewpoint, Blome et al. (2014) found that the buyers
market performance was positively related with the adoption of green purchasing. In
addition, top management commitment was the key factor for both green procurement
and green supplier development.
The above literature shows that multi-criteria decision making methods, such as
AHP and ANP are the most popular ones, belong to qualitative methods. Recycling is
the most effective way to improve the green degree in daily production processes,
especially in manufacturing industries, such as the aluminum industry (Fereetti et al.,
2007; Chaabane et al. 2012). Hence, this study proposes a quantitative approach to
study the green purchasing relationship between buyers and suppliers with recycling.
2.3 The applications of the EGT
The evolutionary game focuses on the interaction among different players
(populations) or groups. Supported by the different strategies, players interaction
behavior directly influences their payoff (Nowak and Sigmund, 2004). The main idea
of the EGT is to find the frequencies of strategies adopted in the population during the
evolutionary game process as the evaluation criterion in making decisions. Xiao and
Gang (2006) pointed that the fraction and probability in a mixed strategy has different
meanings. The fluctuation of the fraction describes the evolutionary process of the
populations strategies. The probability focuses on the strategies selected
stochastically. In terms of determination of these frequencies, different methods were
proposed, such as, a replicator dynamic system (Friedman, 1991), a simulation
method (Nowak and May, 1992), a differential equation method (Roca et al., 2009 and

Santos et al., 2012). The EGT can fully reflect the relationship between strategy
change and payoff fluctuation, and this advantage has lead to the EGT being applied
in different research fields, such as biology and economics.
Vincent et al. (2009) studied the issue of species abundance within a community
by use of EGT. The species were taken as ecological strategies. In addition, the EGT
can also be taken as an optimization tool. Jin et al. (2010) applied the EGT to
transform a multi-objective optimization problem into a game strategic model. The
optimized strategy was achieved by the process of dynamic game evolution.
Considering the dynamic behavior of the population size was neglected,
Melbinger et al. (2010) proposed a generic stochastic model to study the internal
evaluation and dynamic growth of the population. From another angle, Hilbe (2011)
studied an EGT model with infinite and finite populations. The results showed that
strategies were selected according to a probabilistic Moran process under finite
populations.
In terms of GSCM applications, Naini et al. (2011) developed a mixed
performance measurement system which integrated the EGT and the balanced
scorecard (BSC). The decision maker can select the best strategy by the dynamic
approach. Requejo and Camacho (2011) also studied the evolution of cooperative
behavior with limited resources by connecting resource based models and the EGT.
Vasile et al. (2012) studied market competition and cooperation based on the EGT.
Different decision variables or factors could influence companies payoff, and
prerequisites for cooperation or competition were discussed. In addition, the
correlation analysis between strategies (cooperation or competition) and model
parameters were also analyzed. Given the booming network market and limited
network resources, Seredynski and Bouvry (2013) used the EGT to study the
development of cooperation, the network size, and the type of participating nodes.
Similarly, Kim (2011) presented a new online power control scheme using the EGT.
In order to improve network efficiency and flexibility, a scheme was suggested by
analyzing the network equilibrium. Jin et al. (2013) applied the EGT to build a
computer virus propagation model, which described the game processes between

normal users and potential attackers. The equilibrium and stable strategy was
discussed by a replication dynamic system. Recently, Tian et al. (2014) developed a
system dynamics model by using EGT to discuss the relationship between subsidy
policies and the diffusion of green supply chain management in China. Simulations
results showed that subsidies for manufacturers are superior to consumers, besides,
the environmental awareness is key factor to GSCM.
Traditional supplier selection criteria, green supplier selection model, and
applications of the EGT have been elucidated. The analysis results show that: (1)
green supplier relationship management issue has been mainly studied since 2010;
Not all of methods and evaluation criteria are suitable to a specific industry; (2) the
models reviewed in section 2.2 are just focusing on the one-time procurement; In
reality, the selection process owns a multi-period property, thus, the supplier selection
concept model suggested by de Boer et al. (2001) should be a closed loop;
From the above literature review, it is noticed that the EGT is a good tool to help
social scientists to study human cooperation (Rosas, 2010). Naturally, the EGT owns
the advantage of dealing with cooperation or competition between two parties
(players). In a supply chain, the relationship between the suppliers and the buyers, the
two players, is either competition or cooperation, so it is natural to apply the EGT to
green supply chain management. The EGT can effectively reflect the complex
relationships among multi-stakeholders, such as suppliers and manufacturers. The
different green strategies adopted by multi-stakeholders which directly influence the
green degree of a supply chain. Besides, the EGT also could used to observe the
changing of cooperation tendency among multi-stakeholders.
The objective of this paper is to study the changing of cooperation tendency
among multi-stakeholders (buyers and suppliers). The EGT is adopted to describe the
phase of further evaluation by analyzing green costs and its benefits of players. More
specifically, based on the results of final selection, and with consideration of
environmental protection, the recycling factor, as the green criterion, is investigated
from the viewpoint of manufacturers (buyer) in order to prepare well for future
procurement. The outcome of this study will provide suggestions for those industries,

who are willing to transfer from the traditional mode to the green mode.

3. An Evolutionary Game Model for Green Purchasing Relationship

3.1 Model description
In a supply chain, the essential objective of the transaction parties (suppliers and
buyers) is to maximize their profits from the economic viewpoint. In addition, due to
the demand uncertainty, buyers may adjust their strategies in changing suppliers, so
their cooperative relationship with these suppliers is not eternally immutable. On the
other hand, during each procurement cycle, these suppliers may adjust their strategies
(or trade behavior) to enlarge the business volume in order to make higher profits
based on the information in the last period. Thus, in order to comprehensively
describe the phenomenon of cooperation or competition between suppliers and buyers,
an evolutionary game model is developed for the green procurement relationship.
Here, a green criterion, recycling, is considered in the green procurement relationship.
Few papers deeply discuss the value of recycling as reviewed early. However, in the
manufacturing industry, not all of the green evaluation criteria are suitable, however,
recycling is the key factor, for instance, in the aluminum industry (Fereetti and Zanoni
et al., 2007; Chaabane and Ramudhin et al. 2012). The details of the evolutionary
game model are described in the following sections.
3.2 Notation
i

Index for suppliers, i=1, 2, 3, l

Index for manufacturers (buyers), j=1, 2, 3, , m

Index for different kinds of raw materials, k=1, 2, 3, , n

k
i

Unit price of raw material k from supplier i

Ci

Unit production cost of raw material k from supplier i

wi

Wholesale price of raw material k from supplier i

eik

Recycling rate of raw material k from supplier i

Ri k

Unit waste recycling cost of raw material k from supplier i

ik

Profit of supplier i from remanufacturing raw material k

Ui

Setup cost of supplier i

D(ik)

Market demand of raw material k from supplier i

Cj

Unit production cost of manufacturer j

Pj

Product price of manufacturer j

D(Pj)

Market demand of products made by manufacturer j

Uj

Setup cost of manufacturer j

Penalty cost for breach of contract

3.3 The Model

Firstly, the payoff matrix between suppliers and manufacturers can be established
based on the trading contract. Then, in the second step, based on the payoff matrix
and the fitness payoff of each player (either buyers or suppliers) who adopts different
strategies, a replicator dynamic system will be formulated. In addition, two theorems
are proposed to analyze the ESS (evolutionarily stable strategy).
The demand market is full of uncertainty, as discussed early. For the sake of
achieving maximum profit, both players have to develop a contingency plan to
minimize their purchasing risk. The buyer may breach the purchasing contract, such
as in a financial crisis, so the suppliers, to avoid overstocked products, will wholesale
all the raw materials to the market. In this case, a penalty (B) is charged to the buyers
to compensate for the profit loss for the suppliers, and vice versa. If both players
breach the contract, no penalty (B) can be charged.
Step 1: Establishing a Payoff Matrix
In the game model, the suppliers and the manufacturers (buyers) have different
strategies and payoffs. The two players play the game under bounded rationality and
uncertain situations. The model proposed here considers the pure strategies of each
player. The suppliers pure strategies are: (1) Cs: willing to recycle waste raw
materials and cooperate with the manufacturers (recycling); (2) Us: not willing to
cooperate with the manufacturers (no-recycling). The pure strategies of the
manufacturers are: (1) Cm: to buy raw materials from the suppliers (buying). (2) Um:
not to cooperate with the suppliers (no-buying). Table 1 depicts the payoff matrix of
the two players.
Table 1. Payoff matrix

Step 2: Formulating a Replicator Dynamic System

Among the l suppliers, some accept the recycling strategy (Cs) and some accept
the no-recycling strategy (Us). Let x represents the proportion (fraction) of suppliers
who accept the strategy Cs among all suppliers, then 1 x is the proportion of
suppliers who accept the strategy Us. Similarly, y represents the proportion of
manufacturers who accept the strategy Cm (buying) among all manufacturers, and 1
y is the proportion of manufacturers who accept the strategy Um (no-buying). Thus,
( x , y ) [0,1] u [0,1] . When the fitness payoffs of the two players are lower than their

average fitness payoffs, a player (manufacturer or supplier) adjusts his/her strategies

during the game process, so x and y are changing.
Let fs1 and fs2 be the fitness payoffs of the suppliers who take different strategies
(recycling or not, respectively). According to table 1, fs1 and fs2 are as follows.
f s1

y 3 s1  (1  y ) 3 s 2

(1)

fs2

y 3 s 3  (1  y ) 3 s 4

(2)

where,

3 s1

D([ik )([ik  eik Oik )  D([ik ) (Cik  eik Rik )  U i

(3)

3 s2

D([ik )( wik  eik Oik )  D([ik ) (Cik  eik Rik )  U i

(4)

3 s3

D([ik )( wik  Cik )  U i  B

(5)

3s4

D([ik )( wik  Cik )  U i

(6)

Equations (3) to (6) describe the payoff functions of a supplier who adopts
different strategies. If a supplier chooses the recycling strategy, then its payoff
functions are s1 and s2. The differences between equations (3) and (4) are the sales
price and the wholesale price. Under the non-recycling strategy, the penalty cost (B) is
the only difference between s3 and s4.
Similarly, the fitness payoffs of the manufacturers with the two different
strategies (buying or not, respectively) are fm1 and fm2.
f m1

x3 m1  (1  x ) 3 m 3

(7)

x3 m 2  (1  x ) 3 m 4

fm2

(8)

where,

3 m1

D( Pj )( Pj  [ik  C j )  U j

(9)

3m2

D ( Pj )( Pj  C j )  U j  B

(10)

3 m3

D( Pj )( Pj  wik  C j )  U j

(11)

3m4

D( Pj )( Pj  C j )  U j

(12)

Equations (9) to (12) depict the payoff functions of a manufacturer who takes
different strategies. Facing the suppliers strategies, a manufacturer purchases the raw
materials from the suppliers have the normal price and obtain profit m1. If the
procurement is executed with the wholesale price, that is, the purchasing contract is
broken, the manufacture gets the profit m2 with the penalty (B). In Equation (11), the
manufacturer can buy the wholesale materials with the profit m3. If both players are
unwilling to cooperate, the manufacturer gets the profit m4.
Based on the above fitness payoff analysis, the average fitness payoffs of the
suppliers (fs) and of the manufacturers (fm) can be defined, respectively, as follows:
fs

xf s1  (1  x ) f s 2

(13)

fm

yf m1  (1  y ) f m 2

(14)

According to the research work by Friedman (1991) and Xiao et al. (2006), in a
replicator dynamic system, the growth rate of a strategy selected by the players should
be equal to its fitness less the population average fitness among each player. So, the
<

replicator dynamic equations of Cs (cycling) selected by the suppliers ( f1 ) and Cm

<

(buying) selected by the manufacturers ( f 2 ) are as follows:

f1

x ( f s1  f s )
f2

x (1  x ) ^ y[ D ([ik ) ([ik  wik )  B ]  D ([ik ) eik (Oik  Rik )` (15)

y ( f m1  f m )

y (1  y ) ^x[ D ( Pj )( wik  [ik )  B ]  wik `

(16)

Equations (15) and (16) are the continuous frequency dynamic systems for the
supplier and the manufacturer population, respectively.

3.4 Model discussion

In the above replicator dynamic system, the equilibrium points ( x , y ) [0,1] u [0,1]
make the replicator dynamic equations equal to zero. From equations (15) and (16),
two theorems can be derived as follows.
Theorem 1. For the replicator dynamic system represented by Eqs. (15) and (16),

(i) The four fixed points, (0, 0), (0, 1), (1, 0), (1, 1), are its equilibrium conditions.
(ii) If wik <ik < wik B/D(Pik), let (x*, y*) be the equilibrium point on [0,1] u [0,1] , then
x*

wik
, y*
k
k
D ( Pj ) ( wi  [i )  B

D ([ik ) eik ( Rik  Oik )

D ( Pj ) ([ik  wik )+B

(17)

Proof

The fixed four points in (i) are clear. According to the stability theorem of
differential equations, the equilibrium point of the replicator dynamic system
represented by Eqs. (15) and (16) should satisfy

f1 ( x, y )

0, f2 ( x, y )

0
(18)

and ( x , y ) [0,1] u [0,1] , so,

x*

wik
, y*
k
k
D ( Pj ) ( wi  [i )  B

D ([ik ) eik ( Rik  Oik )

D ( Pj ) ([ik  wik )+B

In addition, Theorem 1 (ii) can also be checked by a Jacobian matrix (Hofbauer

and Sigmund, 1998). The Jacobian matrix, J, of the replicator dynamic system is:
(12x)^ y[D([ik ) ([ik  wik )  B]D([ik ) eik (Oik  Rik )` x(1 x)y[D([ik ) ([ik  wik )  B]
(19)
J
k
k
k
k
k

y
(1
y
)
x
[
D
(
P
)(
w
[
)
B
]
(1
2
y
)
x
[
D
(
P
)(
w
[
)
B
]
w







^
`
j
i
i
j
i
i
i

The determinant (det) and the trace (tr) of J are as follows. det J < 0 and tr J= 0,
when x = x*, y = y*.

xy[D([ik )([ik  wik )  B][D(Pj )(wik [ik )  B]  yBwik 

det J (1 2x)(1 2y) k k k

(20)
k
k k
k
k k k
k
k
D([i )([i  wi )[ ywi  xD(Pj )]ei (Oi  Ri )  D([i )ei (Oi  Ri )(xB  wi )
tr J (12x)^ y[D([ik ) ([ik  wik )  B]D([ik ) eik (Oik  Rik )` (12y)^x[D(Pj )(wik [ik )  B]wik` (21)

Theorem 2.

(i) The equilibrium point (0, 0) is the ESS, if Rik > ik.
(ii) The equilibrium point (0, 1) is an unstable point, if ik > Rik.
(iii) The equilibrium point (1, 0) is an unstable point, if Rik > ik and D(ik) > (wik
B)/(wik ik).
(iv) The equilibrium point (1, 1) is the ESS, if ik > Rik, D(Pj) < (wik B)/(wik ik),
and (ik wik)[ D(Pj) D(ik)] + D(ik) eik(Rik - ik)+ wik < 2B.
(v) The equilibrium point (x*, y*) is a saddle point when wik < ik < wikB/D(ik).
Proof

(i) When Rik > ik, x = 0, and y = 0, det J > 0 and tr J < 0, the equilibrium point (0,
0) is an ESS.
(ii) When ik > Rik, x = 0, and y = 1, det J > 0 and tr J > 0, the equilibrium point (0,
1) is an unstable point.
(iii) When Rik > ik and D(ik) > (wik B)/(wik ik), x = 1, and y = 0, det J > 0 and
tr J > 0, the equilibrium point (0, 1) is an unstable point.
(iv) When ik > Rik, D(Pj) < (wik B)/(wik ik), (ik wik)[ D(Pj) D(ik)] + D(ik)
eik(Rik ik) + wik < 2B, x = 1, and y = 1, det J > 0 and tr J < 0, so, the equilibrium
point (1, 1) is an ESS.
(v) When wik < ik < wik B/D(ik), x = x*, y = y*, det J > 0 and tr J < 0, so, the
equilibrium point (x*, y*) is the saddle point.
Theorem 1 includes all the equilibrium points on [0, 1][0, 1] based on the
replicator dynamic system. Another equilibrium point (x*, y*) is found if wik < ik < wik
B/D(ik), besides the four fixed points. Theorem1 provides the basis for the
following analysis, and Theorem 2 further analyzes the ESS under the different
conditions. The above ESS is obtained theoretically. In each period, the procurement
parameters (wik, ik, eik, Rik, ik, B) of supplier i directly determine his/her strategy. So,
the suppliers who adopt a green development strategy can benefit the downstream
manufacturers in the supply chain. In the further evaluation phase, the two players
should identify the rationality of these parameters. If the ESS of the suppliers tends to
be zero, that is, more suppliers select the no-recycling strategy; the manufacturers

have the responsibility to negotiate with the suppliers and to encourage them to select
the sustainable recycling strategy. Otherwise, the manufacturers should develop new
partners. The above results also indicate that the recycling capability of the suppliers
directly influences the achievement of sustainable supply chain management.

4. An Application

Although the theoretical results have been analyzed in section 3.4, to aid
understanding, a simulation of the model is conducted to further clarify the meaning
of the model. The main objective of this section is to observe the cooperation
tendency of the procurement relationship by considering the green procurement
strategy (recycling strategy). To improve revenue and reduce the waste during
manufacturing, more and more companies have realized the importance of recycling.
In Hong Kong, the government has developed an environmental protection program
to help and encourage manufacturing companies to implement recycling. ABC
Company is a traditional toy manufacturing company who has joined a
government-funded environmental program. According to their report, recycling
helped them to reduce toxic emissions reduced with financial saving.
4.1 Parameters Setting

One product with five different components in the company is taken as an

example. Each single component has more than three suppliers. The parameters, as
shown in table 2, in the following simulation experiments were collected from the
company, but were modified for the confidentiality reasons. In the further evaluation
phase, all the data comes from the final selection stage. The parameters in table 2 are
mainly determined by the results from Theorem 1 and Theorem 2.

Table 2. The simulation parameter values

(a) Parameters for suppliers
The parameters for the suppliers can be classified into two types which are the
traditional parameters and the environmental related parameters. The traditional
parameters include the demand for raw material, unit sales price, and wholesale price,

which mainly influence the revenue of suppliers. The environmental related

parameters consist of recycling rate, recycling cost and benefit, which also embody
the recycling capability or green degree of the suppliers.
(b) Parameters for the manufacturers
In the simulation process, the parameters for the manufacturers are mainly
determined by the demand for the final products. This parameter directly determines
the order quantities of raw materials. The penalty costs for breach of contract is a
common parameter for both suppliers and manufacturers. In practice, the penalty
costs also reflect the default risk.
In addition, the other two key parameters are x and y, which are used to describe
the cooperation tendency among multi-stakeholders. The above parameters for both
suppliers and the manufacturer (multi-stakeholders) are the input data of the model.
After setting the initial value of x and y, the cooperation tendency can then be
simulated by using the replicator dynamic equations (15) and (16). The simulation
experiments were conducted on the simulation platform of MATLAB R2012b.
4.2 Results and Discussion

In this simulation model, the manufactureing player is the company while the
supplier player has five groups of suppliers, each group being responsible to supply
one type of raw material (components). Thus, five different groups of simulation
experiments were conducted, each group for one raw material, as shown in Figures 2
and 3. In these two figures, the dotted lines represent the cooperation tendency of the
manufacturer by selecting the cooperation strategy, while the solid lines represent the
proportion of suppliers who willing to select the recycling strategy. The results from
the simulation experiments can be classified into two categories.

Figure 2. The evolutionary processes (Raw materials 2, 3, and 4)

(a) Results of the First Category

In the first category (Figure 2), the replicator dynamic system converges to the
ESS (1, 1) in 100 simulations (that is, 100 purchases) for the suppliers who provide
raw materials 2, 3 and 4. However, the three figures, 2(a), 2(b) and 2(c), reflect

different convergence tendencies with the same initial settings (x = 0.40, y = 0.35). In
Figure 2(a) for material 2, the cooperation tendency of the manufacturer, y, drops to
zero in the first 10 simulations, then it grows rapidly and converges to the ESS. The
main reason is that the suppliers continuously improve the level of raw material
recycling. It can be seen from Figure 2 that when the solid line is increasing, that is,
more suppliers choose the environmental strategy (the recycling strategy), the
manufacturer chooses cooperation. Finally, the ESS (1, 1) is achieved.

Figure 3. The evolutionary processes (Raw material 1-(a) and 5-(b))

(b) Results of the Second Category

In the second category shown in Figure 3, after 100 simulations (purchases), both
the suppliers and the manufacturer are not willing to cooperate with each other, even
at the beginning, and the cooperation tendency setting is relatively higher (x = 0.50, y
= 0.45) than the condition in the first category. The reason is that the recycling cost is
too high, and the recycling rate is very low, so the profit from the recycling is very
small, and the replicator dynamic system converges to the ESS (0, 0). For these two
raw materials, the manufacturer should seek other solutions, for example, to find new
suppliers who have the higher capabilities of recycling in the following purchasing
cycle.
(c) Major Implications
From the above simulation results, three major implications can be summarized.
(1) The simulation results above indicate that the manufacturer and suppliers can
work together to improve the environmental protection of the upstream companies in
the supply chain. Multi-stakeholders can influence each others behavior, which can
change the business environment of the whole market or industry. In practice, an
increasing number of international enterprises have adopted strategies to face
environmental issues for themselves, for instance IBM, HP, etc.
(2) Recycling capability is a key factor for the cooperation tendency among
multi-stakeholders in the long-run. A higher supplier recycling capability will be
recognized by the manufacturer. In reality, this can promote the evolution of

techniques and skills and implement green purchasing to an industry, especially the
metallurgical and manufacturing industries, etc.
(3) Based on the results of the final selection, further evaluation can provide
visions more clearly for multi-stakeholders in the following cooperation. Stakeholders
can place emphasis on cooperators with lower cooperation tendency, such as, the
selection of new cooperators or driving the bilateral cooperation. The above
simulation results show that the manufacturer should focus on selecting new suppliers
who supply raw material 1 and 5 in the following purchasing cycle. As to the other
three types of raw materials suppliers, their cooperation tendency is relatively stable.
In short, green purchasing relationships among multi-stakeholders will influence
the payoffs of the suppliers and manufacturers (buyers) in a two tier supply chain. The
model, which is based on the EGT, developed in this paper was successfully applied
to observe the cooperation tendency among multi-stakeholders. The observation
results can provide better suggestions for the coming purchasing cycle.
5. Conclusions

The green procurement relationship in todays competitive environment is very

important in GSCM. A novel evolutionary game model is proposed to further evaluate
the relationship between multi-stakeholders (suppliers and manufacturers) in this
paper. More specifically, the payoff matrix between multi-stakeholders (suppliers and
manufacturers) under different strategies was analyzed, and the replicator dynamic
system was developed and its ESS solved. In addition, the simulation experiments
were conducted to further validate the theoretical results of the model. The theoretical
and simulation results indicate that the manufacturing industry can form the pattern of
the sustainable development, and the recycling capability of suppliers directly
influences the achievement of sustainable supply chain management.
This study can help multi-stakeholders to develop clear visions in the long run
cooperation. While, there are some limited aspects that should be investigated in the
future work, such as the influence from other stakeholders (local government, etc.) are
not included.

Acknowledgements

The authors are grateful for the useful comments and suggestions made by two peer
reviewers. The authors acknowledge The Hong Kong Polytechnic University for the
financial support of the project (G-RTES). The work described in this paper was also
supported by one grant from the National Nature Science Foundation of China
(Project No. NSFC 61174171)
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Table 1. Payoff matrix

Manufacturers

Cm

Um

Cs

s1, m1

s2, m2

Us

s3, m3

s4, m4

Suppliers

Table 2. The simulation parameters value

Raw material

 ik

wi k

eik

Rik

ik

D(ik)

D(Pj)

0.8000

0.5741

0.3023

0.9444

0.6154

1.0000

0.7292

0.2377

0.8889

0.5000

1.0000

0.7500

0.8182

0.5800

0.8571

0.6250

1.0000

0.5455

0.9375

0.5000

0.6250

0.7576

1.0000

0.2377

0.8857

0.5806

1.0000

0.7742

0.8667

0.6571

0.8571

0.6250

1.0000

0.7143

0.1294

0.8750

0.4909

1.0000

0.8286

0.2377

Figure(s)

Figure 1.The updated decision concept model for green supplier evaluation

(a)-Raw material 2

(b)-Raw material 3

(c)-Raw material 4
Figure 2. The evolutionary processes (Raw material 2-(a), 3-(b) and 4-(c))

(a)-Raw material 1

(b)-Raw material 5
Figure 3. The evolutionary processes (Raw material 1-(a) and 5-(b))