Equilibrium analysis of transaction modes and recycling channels in a closed-loop supply chain with an online platform

Abstract

Due to resource shortages and environmental protection, recycling of used products and remanufacturing have attracted more attention. This paper develops a game-theoretic model to investigate a key question the supply chain members are facing: When should the platform use the agency mode instead of the traditional reselling mode, and when should the manufacturer outsource recycling activities to the platform instead of recycling by himself? The results demonstrated the following: it is better for the manufacturer to outsource the recycling activities (recycle by himself) to the platform if the platform uses the agency mode (reselling mode); for the platform, the best choice is always the agency mode no matter what the recycling channel is; as a result, the equilibrium outcome will be the case where the platform uses the agency mode while the manufacturer chooses to outsource the collection of used products to the platform. This equilibrium leads to the highest recycling ratio, but does not guarantee the supply chain members get the highest but also is not the lowest profits. This study sheds light on how the decisions of transaction modes and recycling channels interact with each other and demonstrates the impact of such interactions on the platform, the manufacturer and the consumers. Furthermore, the results can help one to identify the most appropriate transaction modes and recycling channels for the platform and the manufacturer respectively.