Coordination of two competing closed-loop supply chains: A cooperative game approach

Abstract

In the development of end-of-life (EOL) products recycling, coordinating competing closed-loop supply chains (CLSCs) with restricted coalition has become an important topic that has yet to be thoroughly investigated. In this study, we first investigate the possible coalitions for two CLSCs composed of manufacturers and third-party recyclers under a restricted coalition structure, which is used for deriving the characteristic functions representing the bargaining powers of different coalitions and allocating the overall profits. Subsequently, to fairly allocate the maximal profit, we establish a cooperative game in the form of characteristic function for the two CLSCs and use an advanced solution concept (average tree value) to coordinate them. We find that: compared to other non-cooperative and partial cooperative models, the centralized model can always achieve the best performance, e.g., the highest recovery rate. And the profit of the fully centralized model increases linearly with the increase of the cooperation coefficient. When the third-party recyclers of two CLSCs form alliance, the profit of the manufacturer is positively or negatively correlated with the cooperation coefficient due to the difference of the model and price elasticity coefficient. Under the cooperation of two CLSCs third-party recyclers, the relationship between the profit of the third-party recycler, the profit of the single chain system or the profit of the double chain system and the cooperation coefficient increases first and then decreases, but the inflection point is different. The coordination of two competing CLSCs can be well addressed by the allocation scheme proposed in this study, while satisfying the collective and individual rationalities.