Optimisation of reverse supply chain with used-product collection effort under collector’s fairness concerns

Fairness has been regarded as a vital role in developing and sustaining benign channel cooperation relationships. One can exhibit either distributional fairness when comparing with upstream/downstream parties or peer-induced fairness when comparing with competitors located at the same stage of the supply chain. This paper examines distributional fairness in a simple reverse supply chain (RSC) consisting of one collector and one remanufacturer, and then extends to the case of one remanufacturer and two collectors to investigate the case of peer-induced fairness. Adopting the game-theory analysis framework, we explore the optimal decisions of transfer price and collection effort in the fair-minded RSC and discuss the impacts of fairness concern. It is shown that under some condition channel coordination can be achieved by a simple contract of constant transfer price with distributional fairness concern from the collector, but this is not true when the collectors are peer-induced fair-minded.