Pricing decisions in closed-loop supply chain with collection-relevant demand

This research deals with pricing decisions in a closed-loop supply chain constituted by a manufacturer, two retailers and the end consumers. The manufacturer is assumed to be the Stackelberg leader while one of the retailers engages in collecting activities. In this paper, we consider collecting activities’ effect on demand expansion. In order to capture the optimal decisions of the supply chain members, two optimization models are built with the first one serving as a benchmark model. The analytical results are derived from the models and some numerical studies are further conducted. The results indicate a free-riding effect, i.e., the collecting activities undertaken by a retailer can also slightly benefit the other retailer that does not engage in collection. Our results also show that, in presence of collecting activities’ effectiveness, the manufacturer is willing to pay a transfer price higher than cost savings in remanufacturing which means the motivation to recycling for manufacturer is the increase of total demand rather than cost-saving from remanufacturing.