Collection cooperation breakdown and repair in a closed-loop supply chain during supply disruption and price shock

Abstract

This paper studies a collection channel selection issue in a closed-loop supply chain (CLSC) consisting of a manufacturer, an e-commerce platform and a third-party collector. Three collection modes are available to the manufacturer who lacks collection capability, that is, platform collection (mode P), collector collection (mode C) and dual-channel collection (mode D). After collection, the manufacturer remanufactures and sells remanufactured products through the platform. We formulate a two-echelon Stackelberg game in which the manufacturer is the leader, the platform and collector are both the followers. We analytically drive the optimal collection price of manufacturer and the optimal collection prices of the platform and collector. Then, we characterize the equilibrium evolution of channel selection under supply disruption and remanufactured product price shock. Notably, during the high price stage, the manufacturer may terminate cooperation with the collector if the manufacturer’s disassembling cost is low. Therefore, we propose two re-entry strategies to assist the collector to rejoin the CLSC, namely, side payment and vertical shareholding. Our results show that, although the two re-entry strategies can both enable the collector return to CLSC, the vertical shareholding is superior to the side payment when the competition intensity is weak enough.