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Research on closed loop supply chain with reference price effect

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An Erratum to this article was published on 04 February 2015

Abstract

This paper considers a closed loop supply chain with the manufacturer as the Stackelberg leader. The manufacturer faces three different reverse channels, i.e., (1) manufacturer-managed, (2) retailer-managed, or (3) third party-managed channels. The reference price affects the purchase decision of consumers. Based on game theory, we discuss the reference price effect on the performances across three decentralized reverse channels, and examine the impact of reference price parameter (i.e., reference price coefficient in this paper) on optimal strategies. We conclude that higher reference price coefficient results in lower manufacturer and retailer profits. However, the profit of the third party increases in the reference price coefficient. In addition, some meaningful insights can be derived by comparison without the reference price effect in our models. We found that the scenario without reference price effect is generally superior to that with reference price effect.

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Notes

  1. According to Ferrer and Swaminathan (2010) and the official definition of Caterpillar Company, remanufacturing is a process, wherein used products are disassembled, and their parts are cleaned, tested, and repaired. The finished remanufactured products have the same function and life cycle as the manufactured ones. Most importantly, they can enjoy the same after-sales service. The remanufactured product in Caterpillar is labeled the sign “remanufactured.” In practice, however, single-use cameras from Eastman Kodak Company do not label the sign “remanufactured.” Therefore, the assumption (1) is relatively reasonable.

  2. In real world, the investment of advertising for a manufacturer will be conducted before distributing the new product to produce more potential customers. In the light of psychological knowledge, in this case, the customers may have a reference price higher than the manufacturing cost. Hence, assumption (2) is also compatible with the real life.

  3. Throughout this paper, the pronoun “she” denotes the manufacturer. The pronoun “he” denotes all the other supply chain members.

  4. Note that there are three lines in Fig. 1. The dotted line represents the third party-managed channel \((3P)\), whereas the dashed line represents the manufacturer-managed channel \((M)\) and the continuous line represents retailer-managed channel \((R)\), respectively. Hence, in Corollary  1, we pay attention to the dashed line. i.e., \(M\)-managed channel \((M)\). Accordingly, we focus on the continuous line, the doted line in Corollaries  2 and  3, respectively.

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Authors and Affiliations

  1. Department of Management Science and Engineering, School of Management, Zhejiang University, Hangzhou, China

    Jie Xu & Nan Liu

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  1. Jie Xu
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  2. Nan Liu
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Correspondence to Nan Liu.

Additional information

An erratum to this article is available at http://dx.doi.org/10.1007/s10845-015-1038-4.

Appendix

Appendix

Table 1 The optimal solutions among the CLSCs without reference price effect (Savaskan et al. 2004)
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Table 2 The optimal solutions among the CLSCs with reference price effect
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Xu, J., Liu, N. Research on closed loop supply chain with reference price effect. J Intell Manuf 28, 51–64 (2017). https://doi.org/10.1007/s10845-014-0961-0

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