Pricing and quality improvement strategies in a closed-loop supply chain with dual collection channel

Abstract

This paper presents two-period closed-loop supply chain (CLSC) models considering demand with and without replacement sales. A manufacturer produces a new product using raw materials in the first period, and the manufacturer and a third party compete to collect used products in the second period. Further, the manufacturer produces an improved version of the new product using raw materials and returned-used products in the second period. The product is sold through a retailer in both periods. We propose a two-period Stackelberg game with the manufacturer as a leader to investigate the product’s pricing strategy and quality improvement level. It is shown that the quality improvement level improves with an increase in the sensitivity of return to the competitor’s acquisition price but deteriorates with an increase in sensitivity of return to the collector’s acquisition price. Finally, we implement a cross-shareholding coordination mechanism and observe an improvement in the quality level and profits of the manufacturer and the retailer.