Pricing Strategy for Reproduction of Worn-out Ball and Gate Valves in Oil and Gas Industry: Using Game Theory on Four Closed-loop Supply Chain Scenarios

Abstract

Collecting and remanufacturing worn-out products provide significant financial advantages. In this research, we examine how remanufacturing worn-out ball and gate valves, which are important pieces of equipment in the oil and gas industry, could improve the profitability of the closed-loop supply chain. In this regard, four different scenarios for collecting and remanufacturing processes are considered: (1) the manufacturer collects the worn-out product from the consumers and remanufactures them, (2) the retailer collects the worn-out products and both manufacturer and retailer remanufacture them, (3) the third party collects the worn-out products and both manufacturer and third party remanufacture them, and (4) the manufacturer collects the worn-out products without remanufacturing them. To formulate the interactions of the CLSC members under the four different scenarios, we use the Nash and Manufacturer-Stackelberg games. Accordingly, the optimal decision variables i.e., the acquisition price, wholesale price, and retail price are calculated under four scenarios. Then, the optimal solutions are compared in four scenarios. In addition, the optimal profit of the closed-loop supply chain and members are obtained under the different scenarios. The results show that in the Nash game, Scenario 2 is the best scenario. However, in the Stackelberg game, Scenario 3 is the best scenario.