Tax-subsidy or reward-penalty? Determining optimal strategy in sustainable closed-loop supply chain under quality-dependent return

Abstract

In today's competitive business world, focusing solely on financial considerations can limit market demand in any industry. Keeping this in mind, this study deals with a sustainable closed-loop supply chain (CLSC) comprising an environmentally conscious manufacturer, a retailer, and a third-party collector (TPC) under the influence of government intervention. The manufacturer offers a return policy for the defective product up to a certain time, and the TPC offers an acquisition price to consumers for returning their used products. The government can offer no intervention or a tax-subsidy policy in the forward logistics, or a reward-penalty mechanism (RPM) in the reverse logistics, or both. Relying on different government policies, four models are developed first. After that, two collaborative models, viz. manufacturer-retailer collaboration and manufacturer-TPC collaboration, are developed for improving channel performance under the manufacturer-led Stackelberg gaming approach. Numerical results disclose that the government subsidy to consumers provides better functionality to channel individuals, consumers, and the environment. If the government considers imposing a tax, the RPM can help to improve channel execution marginally. A collaborative strategy between the manufacturer and the retailer under government taxation and RPM becomes the most efficient strategy for enhancing the triple bottom line of sustainability.