A game-theoretic approach for pricing in a dual-channel socially responsible closed-loop supply chain under reward-penalty mechanism

The circular economy, which aims to increase sustainability, reduce waste, and optimize the utilization of resources in the supply chain, has received much attention in recent years from researchers. In addition, strict environmental regulations have required firms to accept responsibility for their end-of-life products. This research investigates a Closed-Loop Supply Chain (CLSC) that incorporates dual competitive channels in both the forward and reverse chains, in addition to a Reward-Penalty Mechanism (RPM), to address the issues of sustainability and end-of-life products in supply chains. The CLSC includes a manufacturer, a retailer, and a third-party collector. In the forward chain, the manufacturer and the retailer deliver new and refurbished products to customers through online and retail channels. In the reverse chain, the manufacturer collects the used products through retail and third-party collector channels to remanufacture the end-of-life products. This research examines the decisions related to pricing and collection rates of used products in the CLSC under the RPM. The problem is formulated and solved under decentralized, centralized, and coordinated structures with a game theoretic approach. The study’s findings indicate that the coordinated structure, utilizing a two-part tariff contract, outperforms the decentralized model in terms of collection rate and profitability for all members of the CLSC. Furthermore, the RPM enhances the benefits of remanufacturing activities for both the economy and the environment by increasing the collection rate of used products.