Return Policy of Chain to Chain Competition

Abstract

The effect of return on price and profit of manufacturers and retailers in chain to chain competition is examined under uncertainty yielding several new and important conclusions. First, within certain range of demand uncertainty, the return policy is win-win for manufacturers and retailers, and improves efficiency of the whole supply chain. As the intensity of competition increases, the win-win range becomes more robust. By contrast, monopoly supply chain is impossible. On the other hand, when the uncertainty is less than another boundary, manufacturers have strong motivation for the returns policies. We demonstrate that in general, returns policies intensify the competition among retailers, however, within some range of demand uncertainty, returns policies mitigate the competition among manufacturers and otherwise, intensify the competition among manufacturers which leads to a decrease in wholesale price. Those results enlarge current conclusions with related return policy.