Decision-making of closed-loop supply chain under Corporate Social Responsibility and fairness concerns

Abstract

In recent years, manufacturers have been under pressure from consumers and the government in terms of environmental awareness and corporate social responsibility (CSR). The CRS behavior regulated by government subsidy is limited understood and needs attention urgently. In this study, three closed-loop supply chain (CLSC) models, including one decentralized decision-making model without fair concerns, one decentralized decision-making model with fair concerns, and one centralized decision-making model with fair concerns, were designed to for understanding the influence of government subsidy, CSR coefficient, and fairness concerns on decision-making by comparing optimal solutions of these models. Proportion of government subsidy was utilized as a coordination variable to design a joint contract of ‘government subsidy sharing and cost sharing’ and to coordinate decentralized decision-making. On this basis, two extended models, a CSR-based fairness concern model and a government decision-making model, were proposed. Finally, the models are verified by numerical experiments. Conclusions that we drew from this study. Our research shows that: (i) There is a threshold for the manufacturer’s CSR, and CSR works only if it is higher than this threshold. Both the CSR behavior of manufactures and the fairness concerns of retailers can increase consumer surplus, retailer’s profit, and system profit but damage the leading enterprises’ profit. CSR behavior of manufactures can effectively diminish retailer’s fairness concern, but will reduce the efficiency of government subsidy to some degree which differs from past researches. (ii) The impact of retailers’ fairness concern about the profits gap is twofold. On one hand, it decreases the sales price and increases the consumer surplus in the forward supply chain. On the other hand, it decreases the price and quantity of recycling in the reverse supply chain. (iii) The centralized decision-making model has the lowest retail price of products, the highest the recycling price of waste products, and the highest system profit. (iv) After coordination, the retailer’s share of profits increases as the fairness concern increases, but the feasible scope for coordination mechanisms decreases.