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Coordination in Closed-Loop Supply Chain with Price-Dependent Returns

  • Pietro De GiovanniEmail author
  • Talat S. Genc
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 280)

Abstract

This paper proposes two Closed-loop Supply Chain (CLSC) games in which a manufacturer sets some green activity programs efforts and a retailer sets the selling price. Both strategies influence the return rate, which is a state variable. The pricing strategy plays a key role in the identification of the best contract to achieve coordination as well as in achieving environmental objectives. The pricing strategy influences the return rate negatively, as consumers delay the return of their goods when the purchasing (and repurchasing) price is high. We then compare a wholesale price contract (WPC) and a revenue sharing contract (RSC) mechanism as both have interesting pricing policy implications. Our result shows that firms coordinate the CLSC through a (WPC) when the sharing parameter is too low while the negative effect of pricing on returns is too severe. In that case, the low sharing parameter deters the manufacturer to accept any sharing agreements. Further, firms coordinate the CLSC when the sharing parameter is medium independent of the negative impact of pricing on returns. When the sharing parameter is too high the retailer never opts for an RSC. We find that the magnitude of pricing effect on returns determines the contract to be adopted: For certain sharing parameter, firms prefer an RSC when the price effect on return is low and a WPC when this effect is high. In all other cases, firms do not have a consensus on the contract to be adopted and coordination is then not achieved.

Keywords

Closed-loop supply chain Dynamic return rate Coordination Wholesale price contract Revenue sharing contract 

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Department of Operations ManagementESSEC Business SchoolParisFrance
  2. 2.Department of EconomicsUniversity of GuelphGuelphCanada

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