A Two-Stage Closed-Loop Supply Chain Pricing Decision: Cross-Channel Recycling and Channel Preference

• Published in: Axioms Vol. 10; no. 2; p. 120
• Main Authors: Pan, Wenjun, Lin, Miao
• Format: Journal Article
• Language: English
• Published: Basel MDPI AG 01.06.2021
• Subjects: centralised decision-making; closed-loop supply chain; cross-channel recycling; decentralised decision-making; Decision making; Decision theory; Game theory; Manufacturing; Pricing; pricing decisions; Profitability; Profits; Recycling; Retailing; Supply chains
• ISSN: 2075-1680; 2075-1680
• DOI: 10.3390/axioms10020120

This paper focuses on the pricing problem of a two-stage closed-loop supply chain (CLSC) considering the cross-channel recycling and channel preference based on a single manufacturer and a single traditional retailer. The pricing decision problem raises from the manufacturer’s direct sales and the retailer’s retailing including recycling. Managers need to focus on intelligible management considering consumer channel preferences, cross-channel recovery and pricing strategies. According to game theory, centralized and decentralized CLSC decision models are used to provide an efficient solution to managers for the pricing problem. The centralized model consists of differential and uniform pricing strategy and the decentralized model consists of manufacturer-led Stackelberg, retailer-led Stackelberg and Nash equilibrium game, respectively. The impact of cross-channel recycling rate and channel preference on pricing and profitability in a two-stage CLSC system is explained elaborately in this study. The results show that cross-channel recovery rates and consumer channel preferences have a direct significant impact on pricing strategies including profit allocation decisions in CLSC. It demonstrated that different channel preferences leading to different pricing strategies and decision for manufacturers and retailers choices. Manufacturer’s pricing decreases when channel preferences are constant and cross-channel recovery rates increase. Retailer’s pricing remains stable as the cross-channel recovery rate has less affected on it. Furthermore, if the cross-channel recovery rates increase, then the manufacturers pricing decreases and retailers pricing increases. This information will be a helpful guideline for the manager to select suitable pricing strategies based on the company scenario.