Pricing policies in a dual-channel supply chain considering flexible return and energy-saving regulations

Abstract

Due to the consistent growth of energy consumption and its impacts on production costs and the environment, governments have recently begun to devise and implement various energy-saving (ES) strategies. This paper studies the optimal pricing decisions in a dual-channel supply chain (SC) —consists of a manufacturer and a retailer— under different government intervention policies, namely ES, revenue seeking, social welfare, and sustainable development. We develop an extended dual-channel SC model under flexible return policies, including full-refund via the direct (i.e., manufacturer) channel, the indirect (i.e., retailer) channel, and both direct and indirect channels. A dynamic multi-level Stackelberg game approach is used to examine the SC interactions and characterize the return strategy, optimal pricing, and ES level decisions under different scenarios. The results show that employing full-refund via the indirect channel policy under price incentive schemes not only maximizes the profit of dual-channel SC but also satisfies the government’s objective functions. In contrast to other intervention policies, the revenue seeking policy does not necessarily improve the social welfare and energy saving level unless the government budget is increased.