Pricing and collection decisions of a closed-loop supply chain with remanufacturing under reciprocal preferences

Abstract

This paper examines the effects of reciprocal preferences on the performances of a closed-loop supply chains (CLSC) with remanufacturing. Specifically, we incorporate reciprocal preferences into a two-echelon CLSC in which the manufacturer collects used products and then remanufactures the other parts except for key components as well as producing new products, and must purchase such key components from the supplier. Using a supplier-led Stackelberg game framework, the models are constructed with and without reciprocity, and then the effects of reciprocity on channel efficiency, consumers, environment and society are examined. We show that, (i) if the supplier reciprocates, the collection rate, the CLSC’s total profit, the channel efficiency and the consumer surplus enhance. Additionally, if only the manufacturer reciprocates, the CLSC’s profit remains constant; (ii) under certain conditions, the reciprocal preferences of both channel members aggravate environmental impact, while benefit social welfare; (iii) Pareto improvement can be achieved if the reciprocity parameters of both channel members are relatively high, and a simple procurement price contract can conditionally coordinate the CLSC. Finally, two extensions are studied by considering consumer heterogeneity and solving a two-period game problem, and the results characterize how reciprocal behaviors drive the performances of channel members.