Modelling closed-loop dual-channel supply chain: A game-theoretic approach to maximize the profit

Abstract

The essentials of clean environment and sustainable development witnessed the rise in closed-loop supply chains. From past two decades, the studies on digitalization of supply chain activities considering resource scarcity, reuse and remanufacturing have engrossed attention from academia about fundamentals of Closed-Loop Dual-Channel Supply Chain (CLDSC). In this paper, a two-level CLDSC consisting of a manufacturer, a retailer, and an e-tailer is considered as a formal buyer and used product collector. The study's main idea is to evaluate optimal pricing and effort decisions for CLDSC scenarios namely; vertically integrated, decentralized, partial retail, partial direct and horizontally integrated scenarios. A Stackelberg game theory and backward induction method is used to get the optimum values of decision parameters (selling price, buyback price, sales effort, and collection effort). Their relations are established, measured and compared to show managerial insights and proportional measures. A numerical illustration with sensitivity investigation is furthermore presented to simulate the effects of channel preferences, price coefficients, sales, and collection effort coefficients for price and effort optimization on decision parameters. As a managerial implication, this analysis helps the channel members to make strategic decisions about CLDSC and choose the best fit channel structure. The findings of this research elucidates partially integrated scenario executes optimum performance in terms of cost and effort both; one can compare the optimum values and predict the outcomes.