Optimizing greenness and pricing in green product development: addressing cannibalization and enhancing market share in a duopoly markets

This study explores the optimization of green product development (GPD) strategies within a duopoly market, focusing on the competition-cannibalization trade-off. In a duopoly market, firms face competitive pressures that necessitate innovation and differentiation, thus providing a unique context to explore the balance between sustainability and profitability. Employing a game-theoretic model, we analyze the strategic interactions between two dominant firms. We introduce a cannibalization index and market share index to evaluate the trade-offs between the economic benefits of green products and the potential erosion of existing product sales. Our findings reveal that consumer environmental awareness significantly impacts optimal pricing and greenness levels, yet also amplifies cannibalization risks due to higher production costs. Sensitivity analyses identify optimal greenness levels that balance market share and profitability, noting that excessively high greenness can be counterproductive. This research provides a breakthrough by offering nuanced insights into the competition-cannibalization trade-off in GPD. Managers and policymakers will benefit from these findings by gaining a deeper understanding of how to strategically position green products to maximize both market share and environmental impact.