Effect of buyback price on channel’s decision parameters for manufacturer-led close loop dual supply chain

Abstract

The objective of this study is to evaluate the effect of self and cross channel’s buyback price on demand, optimum selling price and collection rate for different manufacturer-led close loop dual supply chain structures using Stackelberg game approach. This study considers a dual channel made up of an e-tail as well as a conventional retail channel, and both of these channel members are responsible for forward selling and return collecting practices. A linear model is developed for profit maximization under the aim of optimum selling price and collection rate. A backward induction method is used to find out the optimum values of selling price and collection rate as a function of buyback price. Further, a numerical analysis is done to evaluate the effect of self and cross channel’s buyback price on decision parameters (each channel’s demand, optimum selling price and collection rate). The result shows that, the decision parameters are correlated with the buyback price. If a channel member increase the offered buyback price then it will lead to; an increase in demand at self-channel, decline the demand at the cross channel, raise in the optimum selling price at self-channel, and decline in the collection rate at the cross channel. Further, cross channel’s optimum selling price and self-channel’s collection rate is dependent on self-channel’s buyback price, but the change is based on channel structure. In addition, the results help to gauge the effect of buyback on optimum selling price, demand and collection rate. The study assists channel partners to vary the data set values for the prediction of the results and to compare the results without implementation.