Pricing strategies in a dual-channel green closed-loop supply chain considering incentivized recycling and circular economy

Abstract

In recent years, significant attention has been dedicated to the design of closed-loop supply chains. However, opportunities exist to refine modeling approaches in alignment with circular economy principles. This refinement could foster the collaborative involvement of customers and retailers, resulting in a more sustainable operational framework. This study aims to address this gap, fostering waste reduction, resource conservation, and collaborative engagement in closed-loop supply chains. Thus, a multi-level, dual-channel green closed-loop supply chain that integrates circular economy principles is examined. We focus on implementing an incentive-based recycling program and examining various closed-loop supply chain settings: centralized, decentralized, and collaborative. We aim to determine optimal equilibrium prices, greening levels, and advertising strategies while considering the concurrent aspects of greening and incentivized recycling in today environmentally conscious era. By developing a demand function that integrates price elasticity, cross-price impacts, sustainability, and advertising, we evaluate performance through numerical examples and a case study in the clothing industry. The findings indicate that a collaborative approach surpasses a decentralized one regarding sustainability, guaranteeing profitability across the supply chain. The study also underscores the trade-offs between centralization and decentralization, with the former failing to ensure maximum individual profitability despite augmenting overall chain profits. Our findings can guide managers in reconciling profitability with sustainability when choosing supply chain structures, accentuating the value of collaborative strategies and green cost-sharing contracts. Furthermore, our results highlight that targeted advertising can stimulate demand for green products, and incentivizing circular economy practices through collaboration can yield positive environmental and economic outcomes.