Fashion retail competition on product greenness with overconfidence

Abstract

In this paper, we study the impacts of overconfidence in a competitive retailer setting of green fashion. We model a green fashion supply chain comprising one unbiased manufacturer and two biased retailers, to explore how overconfidence affects greenness level of fashion products and expected profit of retailers. An overconfident retailer has a cognitive bias in which it believes consumers are more sensitive to greenness of fashion products than it really is. Our findings show that the competition between two retailers discourages greenness level of fashion products, while overconfidence can provide a counterbalance to the negative impact caused by competition. We also find, a retailer's overconfidence is not only conducive to the greenness level of its own fashion products, but also can benefit to its rival. Moreover, it shows a low level of overconfidence can be a comparative advantage of the retailer's profit. Even though one of the retailers is unbiased and has an advantage of information, it can still earn less than its overconfident rival.