Optimal decisions of a hybrid manufacturing-remanufacturing system within a closed-loop supply chain

In this paper, we use a game theoretical approach to investigate a topical issue of pricing, used-product collection and retailer's advertising decisions for a two-echelon hybrid manufacturing-remanufacturing closed-loop system, in which the manufacturer has three alternative options for collecting used products: 1) he himself and the retailer collect them simultaneously; 2) he can provide appropriate incentives to induce the retailer and the third party to collect them; 3) he collects them himself directly from the customers, and at the same time subcontracts part of the collection activity to the third party. The main problem considered in this paper is to maximise each supply chain member's profits by jointly considering channel member's pricing, retailer's advertising investment and used-product collection decisions. When the manufacturer is the Stackelberg leader of the game, we obtain Stackelberg equilibrium with the wholesale price, the retail price, the retailer's advertising investment, and the collecting agents' return rates, we further compare the equilibrium solutions under each reverse channel structure. In addition, we also show that a simple two-part tariff contract can be used to encourage the manufacturer and the retailer to achieve the same performances as in a centralised decision-making system. [Received 18 April 2014; Revised 31 January 2015; Revised 25 February 2015; Accepted 9 March 2015]