Pricing and Coordination in a Closed-Loop Supply Chain with TOR and TON Programs Under Distribution and Direct Channels

Abstract

Based on the different receptivity of new and remanufactured products, considering the coexistence of “trade old for new” (TON) and “trade old for remanufactured” (TOR) programs, we develop a game model of closed-loop supply chain (CLSC) under distribution channel and direct channel. First, the conditions of TON and TOR programs are discussed under centralized decisions. Then, the optimal pricing decisions between distribution and direct channels are compared under decentralized scenarios. The results show the remanufacturing cost savings is closely related to TON and TOR programs; under the distribution channel, the price of new and remanufactured products is higher than the direct situation; under the direct channel, TOR program can promote the recycling of waste products, and the profits of the manufacturer and CLSC will be improved, while the retailer's profit will be reduced. In view of the efficiency loss of decentralized decisions, the perfect coordination of CLSC can be realized by using revenue sharing contract under distribution channel; while, to the direct channel, a profit sharing contract can coordinate the CLSC. Finally, combined with the numerical analysis to verify the above conclusions, and further analyzes the impacts of remanufactured products receptivity, products durability, residual value of waste products and remanufacturing cost savings on the profits of the manufacturer, the retailer and CLSC under different channels.