Behavioral research on sustainable and socially/environmentally responsible operations

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Mahmoudzadeh, Mahdi
Thompson, Peter
Ramachandran, Karthik
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With the growth of global interest in sustainability and social responsibility, more companies and manufacturers have started practicing sustainable operations and social and environmental responsibility in their supply chains. Recent advancements in the field of behavioral economics have uncovered many relevant insights that can be of help in understanding interests and motives among different entities in supply chains including suppliers, manufacturers, policy makers, and customers. Utilizing both experimental and analytical methods, this dissertation's focus is to incorporate some of the relevant insights from behavioral economics into topics related to sustainable operations, circular economy, and social responsibility in supply chains. The first chapter looks at replacement purchases and buyback schemes by durable goods manufacturers. In contrast to the classical model and conventional wisdom that ignore the relevance of framing effects in difference schemes, this chapter explores the framing difference between trade-ins and upgrades and studies how relaxing the equivalence assumption modifies predictions of the classical model and provides predictions more in line with today's durable goods markets. The second chapter looks at social/environmental responsibility in supply chains and examines what type of consumer reactions—encouraging ones that highlight the value of responsible sourcing or discouraging ones that highlight the possibility of a consumer boycott—can lead supply chains towards more responsible sourcing. Our results enrich the normative model's insights and lead to a straightforward recommendation for NGOs that is also in line with what can be expected from consumers. This third chapter, motivated by Best Buy's recent recycling program, studies the potential of a charging for recycling program from a circular economy perspective. We find evidence that, in contrast to the long-standing practice of free recycling, charging for recycling can increase adoption of green electronics among consumers. This chapter suggests that current environmental laws that prohibit retailers from charging for recycling may be counterproductive to circular economy.
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