Pricing strategy, return policy and coordination in a two-stage supply chain

ABSTRACT

In this paper, pricing, return and coordination policies in a two-stage supply chain, consisting of a manufacturer and a supplier are investigated. We propose a new return policy that depends on refund amount and selling price of product. Also, we develop and analyse a joint optimisation problem of pricing and return policies where both cooperative and non-cooperative games are used. In non-cooperative game, we use the Stackelberg game theory model where the supplier acts as leader and manufacture is follower, and in cooperative game, we use the Rubinstein bargaining model. Result shows that the system performance in cooperative game is always better than non-cooperative game, and cooperative game based on Rubinstein bargaining and return policy can ensure more than 31% increase in profits of the two-stage supply chain system.

KEYWORDS:

• Return policy
• coordination
• pricing
• supply chain
• game theory

Acknowledgments

The authors thank the anonymous reviewers for their helpful suggestions which have strongly enhanced this paper. The second author would like to thank the financial support of the University of Tehran for this research under Grant Number 30015-1-02.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

University of Tehran [grant number 30015-1-02].