Pricing, greening, and recycling decisions of capital-constrained closed-loop supply chain with government subsidies under financing strategies

Abstract

BackgroundDue to the growing awareness of environmental protection and their economic benefits, there has been rapid development in the closed-loop supply chain (CLSC) in recent years, with a general occurrence of CLSCs led by collectors. MotivationEven with government support such as subsidies, the operation of CLSC still requires immense investment, such as purchasing recycling equipment. Nevertheless, the unprecedented economic recession during the post-pandemic era has heightened the risk of insufficient funding for CLSC. This highlights the importance of understanding the complexities involved in CLSC financing strategies, as they are crucial for ensuring the sustainability and resilience of CLSC in the face of challenges. MethodsTo investigate the equilibrium decisions and financing strategy selection of CLSCs, we developed and analyzed a series of three-stage Stackelberg models, considering practical scenarios involving capital constraints, environmentally friendly green activities, government subsidies for End-of-Life (EOL) recycling, as well as introducing common trade credit financing and bank financing for generality. ConclusionThe findings demonstrate: (1) Under trade credit financing, it is always beneficial for the collector granting credit. Interest income can motivate the collector to recover more EOL products. (2) In addition to financing interest rates, government subsidies and remanufacturing cost savings can affect the financing strategy selection of the capital-constrained manufacturer. Our study provides guidance for managers in selecting optimal financing strategies under specific conditions. (3) The total profit of CLSC under trade credit financing is always higher and we propose a revenue-sharing contract to realize the win-win status with the optimal profit of CLSC. (4) Furthermore, our results underscore the importance of government recycling subsidies, remanufacturing cost savings, and the positive impact achieved by reducing recycling difficulties and enhancing customer awareness of green consumption.