Abstract
The pros and cons of government subsidy policies in a closed-loop supply chain (CLSC) setting on optimal pricing, investment decisions in improving product quality, and used product collection under social welfare (SW) optimization goal have not been examined comprehensively. This study compares the outcomes of three government policies under manufacturer-Stackelberg (MS) and retailer-Stackelberg (RS), namely (i) direct subsidy to the consumer, (ii) subsidy to the manufacturer to stimulate used product collection, and (iii) subsidy to the manufacturer to improve product quality. Results demonstrate that the greening level, used product collection, and SW are always higher under the RS game, but the rate of a subsidy granted by the government is always higher under the MS game. Profits for the CLSC members and SW are always higher if the government provides a subsidy directly to the consumer, but productivity of investment in the perspective of the manufacturer or government are less. In a second policy, the government organizations grant a subsidy to the manufacturer to stimulate used product collection, but it does not necessarily yield the desired outcome compared to others. In a third policy, the manufacturer receives a subsidy on a research and development (R&D) investment, but it yields a sub-optimal greening level. This study reveals that the outcomes of subsidy policies can bring benefit to consumers and add a degree of complication for CLSC members; government organizations need to inspect carefully among attributes, mainly product type, power of CLSC members, and investment efficiency for the manufacturer, before implementing any subsidy policies so that it can lead to an environmentally and economically viable outcome.
Highlights
In last two decades, a closed-loop supply chain (CLSC) is gaining increasing attention from both industry practitioners and academics due to alleged benefits for sustainable development and growing environmental awareness among consumers and environmental regulations [1,2,3,4,5,6,7].Government organizations play an impressive role in the development of sustainable product manufacturing and re-manufacturing decisions; they can enforce strict legislation, as well as offer support through various subsidy policies
The central result emerging from the analysis reveals that in Policy C, CLSC members receive higher profits, social welfare (SW) of the government organization higher, and the consumers receive products at a higher greening level (GL)
Characteristics of the optimal decision under the MS and RS games are not concurrent; GL and used product collection are always higher in the RS game, and the government subsidy rate is always higher in the MS game
Summary
A closed-loop supply chain (CLSC) is gaining increasing attention from both industry practitioners and academics due to alleged benefits for sustainable development and growing environmental awareness among consumers and environmental regulations [1,2,3,4,5,6,7]. In Policy T, the manufacturer receives a fraction of R&D investment from the government as a subsidy to improve the greening level (GL) [13]. This study contributes to the present literature as follows: First, comparative analysis will help practitioners to understand the behavior of pricing, investment decision for the manufacturer in used product return, and R&D to improve GL in a CLSC. Examples belonging to the first categories are developing LED bulbs; integrating an adaptive product business model, energy star home appliances, technology for product-life extension, and high-speed electric cars All of these require a substantial amount of R&D investments. This study provides a complete overview for the manufacturer on the investment decision to produce MDIGPs. comparative study in the perspective of participating members can assist to formulate a framework to design a subsidy policy for green product manufacturing and re-manufacturing.
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