Sustainability is one of the most important issues facing all agents along the global food supply chain. Consumers have an increased awareness about environmental problems, animal welfare, and communities, which has led to greater demand for sustainable food and drink products. This demand induces retailers and manufacturers to produce and market more sustainable products. Some manufacturers are reluctant to implement sustainable practices, or develop and market new sustainable food products due to a lack of information about price premiums of sustainable attributes and a systematic decision model. This dissertation aims to: analyze price premiums of sustainable attributes; construct firms' decision making model; determine under which conditions firms launch sustainable products; and determine which conditions encourage a firm to be a leader who launches a sustainable product before others. Hedonic analysis is used to find the price premiums of sustainable products while game theory, comparative statics, and simulation are utilized to construct the firms' decision making regarding under which conditions firms launch sustainable products, and which conditions encourage a firm to be a leader. The U.S. egg industry was selected to estimate the price premiums of sustainable attributes, and simulate and test the firms' decision making model. According to the study the welfare-managed attribute (free-range or cage-free attribute) is significantly positive. That is, a welfare-managed egg has a price premium over a conventional egg equal to 3.57 cents while the recyclable attribute (paper-pulp packaging attribute) is insignificant. The follower's decision making to launch a sustainable product is the main contribution of the game theory study. That is, the follower decides to produce and market a "me-too" sustainable product when consumers realize the difference between the conventional and sustainable product and are willing to pay more for the sustainable product. If not, the costs of both types have to be sufficiently close to induce the follower to launch the sustainable product. The leader decides to launch a sustainable product when the relative maximum willingness to pay for the sustainable product over the conventional product is greater than or equal to its relative cost or when the maximum willingness to pay for the sustainable product is sufficiently higher than the cost of the sustainable product. The main factors that encourage a firm to be a leader are: 1) a cost advantage in producing a sustainable product, 2) a cost disadvantage in producing a conventional product, and 3) a firms relative cost being lower than the consumers willingness to pay for a sustainable product. The U.S. egg industry simulation results show that both leader and follower firms should market the sustainable eggs to achieve higher profits. The simulation results agree with what is observed in terms of the growth in the free-range and cage-free eggs market in the U.S.
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