Pricing and strategy selection in a closed-loop supply chain under demand and return rate uncertainty
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Pricing and strategy selection in a closed-loop supply chain under demand and return rate uncertainty Jingfeng Dong1
· Shufa Sun1 · Guichen Gao2 · Ruoyi Yang1
Received: 14 September 2019 / Revised: 3 April 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Closed-loop supply chain (CLSC) decision-making involves many uncertainties, which makes the decision-making process more complex and diversified. This study considered a two-stage CLSC consisting of an original manufacturer and a third-party recycler. Without any government policy support, considering the effects of market demand, product return rate, and consumer perceived value, a CLSC decision model based on market demand with a [0,1] distribution was established. The model analyzes three situations—a manufacturer monopoly, the Cournot duopoly game, and the Stackelberg competition game—and solves them. The optimal values of decision variables such as optimal pricing, market demand, and all parties’ profits in the CLSC are obtained, and a strict mathematical proof is given. Through the model-solving process, the effects of product return rate and consumer perceived value on decision variables are analyzed; then, the profit allocation between the original manufacturer and the third-party recycler under different cooperation modes is analyzed. In addition, the four combinations of competition and cooperation are analyzed based on game theory. The Nash equilibrium solution and Pareto optimal solution of the four modes are analyzed by drawing a bimatrix Nash equilibrium table. The results indicate that the cooperation–cooperation mode is difficult to produce automatically, and government policy guidance and support are often needed to achieve Pareto optimality. Finally, a numerical example is given to validate the proposed model. In this way, the proposed model provides reliable theoretical support for the decision-making of both sides in a CLSC. Keywords Closed-loop supply chain · Customer perceived value · Market demand · Return rate · Profit model · Game theory Mathematics Subject Classification 90B06 · 91A35
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1 Introduction With the current focus on industries that are “green, low-carbon, and sustainable,” closed-loop supply chains (CLSC) have gradually attracted the interest of many researchers (Wang et al. 2020; Chen and Ulya 2019; Asim et al. 2019). This initial academic interest stemmed from increased public awareness (Dowlatshahi, 2000). Remanufacturing is one way to deal with returned products in CLSC; it refers to the process of professionally repairing used products to achieve the same quality and performance of new products (Agrawal et al. 2015). Since remanufacturing can not only form a recycling mode but also have considerable economic benefits, it has attracted considerable attention from governments and enterprises. For example, the EU WEEE Directive-2002/96/EC requires enterprises to reuse or remanufacture 75% of their household
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