Pricing and quality competition between two substitute products in a closed-loop supply chain

Abstract

Manufacturers are investing in the production of remanufactured products using quality controls because consumers are becoming more concerned about the environment and product-consistency. From this perspective, we examined a closed-loop supply chain with price and product quality-dependent demand by considering two different quality substitute products with two manufacturers. To examine the impact of pricing competition and product quality levels on the profitability of the supply chain members and the whole supply chain by considering the return rate of end-of-used products as a manufacturer decision variable, we have formulated a centralised and three different decentralised game models under decision power management. We provide a numerical example and analyse a few sensitivity parameters to help the described mathematical models be better understood. The result reveals that the total supply chain is profitable when all the members cooperate. The supply chain members are individually profitable when their competitor leads the market. Also, we see that the supply chain profit rises as product quality and substitutivity levels do.