Abstract
Recycling plays an important role in the reverse supply chain. However, the recycling quality of waste products is highly uncertain. As a related factor of reinvestment cost, quality difference affects the optimal decision in reverse supply chain. By constructing a pricing and profit model based on Stackelberg game theory, this paper studies the reverse supply chain composed by a single manufacturer and a single retailer. The model is designed to analyse the effect of quality difference on their reinvestment cost and optimal decision that results in the optimised reverse supply chain and improved profits. The result shows that the reinvestment cost is directly proportional to the quality level of recycling, inversely proportional to the quality cost coefficient. The higher the recycling quality level, the lower the cost coefficient, the greater the profit of members in the reverse supply chain system gets and the total profit of the system.
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