Strategic role of charitable donation in supply chain coordination with consumer prosocial preference

Enterprises commonly make charitable donations to attract customers to purchase their products. We explore the supply chain coordination problem with charitable donation via a Stackelberg game, wherein the e-commerce platform is the leader and the manufacturer is the follower. The former sells the products and decides the commission, whereas the latter determines the charitable donation investment and price. We investigate the charitable donation and pricing strategies in a centralized and decentralized system, and obtain the following insights. (1) The donation and pricing strategies hinges on the proportion of prosocial customers and the donation cost coefficient. (2) Donation can increase the product price and the supply chain performance, unlike non-donation. (3) In the decentralized system with extremely profitable market conditions, charitable donation will aggravate the competition in the supply chain, which benefits the e-commerce platform but hurts the manufacturer. Nonetheless, under certain conditions, the coordination of supply chain can be automatically realized. (4) A simple two-part tariff contract can perfectly coordinate the supply chain.