Remanufacturing process innovation in closed-loop supply chain under cost-sharing mechanism and different power structures

Abstract

This paper establishes a closed-loop supply chain considering remanufacturing process innovation and its cost-sharing mechanism, where a manufacturer can sell new and remanufactured products through a retailer and decide the effort to improve the remanufacturing process innovation. This paper examines remanufacturing process innovation, pricing decisions and cost-sharing mechanism under different power structures of the closed-loop supply chain. Three models with different power structures are investigated: (1) Manufacturer-led model (MLM); (2) Nash model (NM); (3) Retailer-led model (RLM). We derive and compare the optimal cost-sharing mechanism of the retailer to maximize its own economic performance in each power structure. We find that the performance of NM model is the most effective among the three models. Furthermore, the optimal cost-sharing proportion of the retailer in the RLM model is the highest, and interestingly, it’s not affected by the consumers’ value perception of the remanufactured products. What’s more, through numerical example, we find that when the consumers are more satisfied with remanufactured products, the cost-sharing mechanism will reduce the profits of the members with less power in the closed-loop supply chain.