Optimal pricing and warranty strategies of a closed‐loop supply chain under government subsidies

Abstract

AbstractBoth warranty services and subsidy policies are effective strategies for promoting the development of remanufacturing. According to the warranty provider, this paper considers two possible warranty strategies: the manufacturer warranty and the retailer warranty. The optimal pricing and warranty periods are determined by considering the effect of the consumption subsidy policy through Stackelberg game models. Subsequently, this paper investigates the optimal warranty strategy by comparing the economic and integrated performance of the closed‐loop supply chain. The analytical results indicate that the retailer warranty enables the supply chain to obtain a higher economic performance than the manufacturer warranty. Nevertheless, the integrated performance that combines economic and environmental performance depends on the consumption subsidy level. In addition, this paper finds that the consumption subsidy policy enhances supply chain profitability and consumer surplus but may hurt the environment in certain scenarios. Therefore, this paper derives the optimal subsidy level by maximizing the total social welfare, which takes into account both economic and environmental performance. These findings provide valuable insights for policymakers in remanufacturing.