Coordinating and pricing decisions in two competitive reverse supply chains with different channel structures

Abstract

This paper addresses coordination and competition problem in two reverse supply chains each having its own exclusive retailer and manufacturer. The chains have various collecting channel structures so that one of them uses the advantages of dual channels, where the consumer can return their e-waste through direct or traditional channels, while its competitor collects obsolete products only through its traditional channel. The willingness to return in each channel is a function of self- and cross-discounts of the competitors. Four decision scenarios are investigated; the first and second chain respectively select, Decentralised-Decentralised, Centralised-Centralised, Centralised-Decentralised or Decentralised-Centralised scenario. The closed-form optimal solution of each channel is derived based on the Stackelberg game when the second chain acts as a leader. The most economical scenario is determined by using a Non-Zero-Sum game when each chain plays as a single player in the game. To coordinate the members’ decisions and to convince unsatisfied members, two coordination contracts are offered. Numerical investigations reveal that direct channel suggests more discount and obtains more share of market. The results show that Centralised-Centralised scenario is the best decision from the SCs’ perspective which proposing contracts are able to persuade members to change their strategy to a global decision.

Keywords:

• Coordination contract
• channel competition
• chain-to-chain competition
• game theory
• pricing
• reverse supply chain
• sustainability

Acknowledgements

The work described in this paper was supported by grants from The Natural Science Foundation of China (Grant No. 71471158); and The Research Committee of Hong Kong Polytechnic University (Project Number G-UADM). The authors also would like to thank The Hong Kong Polytechnic University Research Committee for financial and technical support.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Felix T. S. Chan http://orcid.org/0000-0001-7374-2396

Jafar Heydari http://orcid.org/0000-0001-6728-5950

Notes

1 Source: https://www.apple.com/environment/reports/

2 Source: https://www.xerox.com/about-xerox/recycling/enus.html

3 http://www.apple.com/pr/library/2011/01/18Apple-Reports-First-Quarter-Results.html