Decision making and benefit analysis of closed-loop remanufacturing supply chain considering government subsidies

Abstract

Remanufacturing closed-loop supply chain can effectively deal with the deterioration of environmental resources and the limited supply of resources as a part of circular economy. Government subsidies are an important factor to promote its development. In this paper, we consider a two-stage remanufacturing closed-loop supply chain, where the retailer is responsible for recycling, and the manufacturer will innovate in remanufacturing technology based on the extended producer responsibility system. The study constructs a Stackelberg game model with the manufacturer as a leader, and compares the different impacts of the two subsidy strategies on supply chain decisions (i.e., subsidies for investment in remanufacturing technology innovation and subsidies for the cost of remanufactured products). Numerical analyses are conducted to visualize the effects of subsidies on the decision-making of closed-loop supply chain members, environmental benefits, and social welfare. The findings indicate that when the level of subsidy is low, government subsidies for investment in remanufacturing technology innovation can accelerate the upgrading of remanufacturing technology, leading to higher environmental benefits and social welfare compared to subsidising the cost of remanufactured products. The results show that when the level of subsidy is high, government subsidies for remanufactured product costs, while yielding greater environmental benefits and social welfare compared to subsidies for investment in remanufacturing technology innovation, have a lesser impact on the advancement of remanufacturing technology.