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Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy

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  • He, Peng
  • He, Yong
  • Xu, Henry

Abstract

This paper considers a dual-channel closed-loop supply chain (CLSC) where a manufacturer can distribute new products through an independent retailer and sell remanufactured products via a third-party firm or platform (3P) in the presence of possible government subsidy. The two main themes of this research are to explore channel structure and pricing decisions for the manufacturer and government's subsidy policy with competing new and remanufactured products. Three possible channel structures for manufacturer are investigated: (1) no direct sales (Structure D); (2) selling new products directly but distributing remanufactured products through the 3P (Structure MN); (3) selling remanufactured products directly but distributing new products via the retailer (Structure MR). We derive the manufacturer's optimal channel structure and pricing decisions, and government's optimal subsidy level under these three channel structures. We find that government can encourage the manufacturer to adopt desired channel structures by setting appropriate subsidy levels. Furthermore, higher subsidy level always benefits consumers and the whole supply chain, but not always so to the environment. Moreover, when government aims to minimize the environmental impact and subsidy expenditure, the manufacturer and government have different channel structure preferences when the cost saving from remanufacturing is very low or high. However, under a moderate cost saving, they have identical channel structure preference: both prefer Structure MN when the environmental impact discount is relatively high; otherwise, both prefer Structure MR.

Suggested Citation

  • He, Peng & He, Yong & Xu, Henry, 2019. "Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy," International Journal of Production Economics, Elsevier, vol. 213(C), pages 108-123.
  • Handle: RePEc:eee:proeco:v:213:y:2019:i:c:p:108-123
    DOI: 10.1016/j.ijpe.2019.03.013
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    References listed on IDEAS

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    1. Liu, Zhuojun & Diallo, Claver & Chen, Jing & Zhang, Michael, 2020. "Optimal pricing and production strategies for new and remanufactured products under a non-renewing free replacement warranty," International Journal of Production Economics, Elsevier, vol. 226(C).
    2. Sungki Kim & Nina Shin & Sangwook Park, 2020. "Closed-Loop Supply Chain Coordination under a Reward–Penalty and a Manufacturer’s Subsidy Policy," Sustainability, MDPI, Open Access Journal, vol. 12(22), pages 1-28, November.
    3. Haitao Chen & Zhaohui Dong & Gendao Li & Hetian Zhao, 2020. "Joint Advertisement and Trade-In Marketing Strategy in Closed-Loop Supply Chain," Sustainability, MDPI, Open Access Journal, vol. 12(6), pages 1-17, March.
    4. Kaifu Yuan & Guangqiang Wu & Hui Dong & Bo He & Dafei Wang, 2020. "Differential Pricing and Emission Reduction in Remanufacturing Supply Chains with Dual-Sale Channels under CCT-Mechanism," Sustainability, MDPI, Open Access Journal, vol. 12(19), pages 1-27, October.
    5. Haitao Chen & Zhaohui Dong & Gendao Li, 2020. "Government Reward-Penalty Mechanism in Dual-Channel Closed-Loop Supply Chain," Sustainability, MDPI, Open Access Journal, vol. 12(20), pages 1-15, October.
    6. Ziang Liu & Tatsushi Nishi, 2019. "Government Regulations on Closed-Loop Supply Chain with Evolutionarily Stable Strategy," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-29, September.
    7. Caiquan Duan & Guoyi Xiu & Fengmin Yao, 2019. "Multi-Period E-Closed-Loop Supply Chain Network Considering Consumers’ Preference for Products and AI-Push," Sustainability, MDPI, Open Access Journal, vol. 11(17), pages 1-32, August.
    8. He, Peng & He, Yong & Xu, Henry, 2020. "Buy-online-and-deliver-from-store strategy for a dual-channel supply chain considering retailer’s location advantage," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
    9. Essam Kaoud & Mohammad A. M. Abdel-Aal & Tatsuhiko Sakaguchi & Naoki Uchiyama, 2020. "Design and Optimization of the Dual-Channel Closed Loop Supply Chain with E-Commerce," Sustainability, MDPI, Open Access Journal, vol. 12(23), pages 1-21, December.
    10. Liu, Zhuojun & Chen, Jing & Diallo, Claver & Venkatadri, Uday, 2021. "Pricing and production decisions in a dual-channel closed-loop supply chain with (re)manufacturing," International Journal of Production Economics, Elsevier, vol. 232(C).
    11. Sana, Shib Sankar, 2020. "Price competition between green and non green products under corporate social responsible firm," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    12. Wen, Danping & Xiao, Tiaojun & Dastani, Mehdi, 2021. "Channel choice for an independent remanufacturer considering environmentally responsible consumers," International Journal of Production Economics, Elsevier, vol. 232(C).
    13. Wanting Chen & Zhi-Hua Hu, 2020. "Analysis of Multi-Stakeholders’ Behavioral Strategies Considering Public Participation under Carbon Taxes and Subsidies: An Evolutionary Game Approach," Sustainability, MDPI, Open Access Journal, vol. 12(3), pages 1-26, January.
    14. Lijun Meng & Qiang Qiang & Zuqing Huang & Baoyou Zhang & Yuxiang Yang, 2020. "Optimal Pricing Strategy and Government Consumption Subsidy Policy in Closed-Loop Supply Chain with Third-Party Remanufacturer," Sustainability, MDPI, Open Access Journal, vol. 12(6), pages 1-29, March.
    15. Liping Song & Yingluo Yan & Fengmin Yao, 2020. "Closed-Loop Supply Chain Models Considering Government Subsidy and Corporate Social Responsibility Investment," Sustainability, MDPI, Open Access Journal, vol. 12(5), pages 1-27, March.

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