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Static and Dynamic Pricing Strategies in a Closed-Loop Supply Chain with Reference Quality Effects

Zhichao Zhang (), Qing Zhang (), Zhi Liu () and Xiaoxue Zheng ()
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Zhichao Zhang: College of Management, Anhui Science and Technology University, Anhui 233100, China
Qing Zhang: School of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
Zhi Liu: College of Management Engineering, Anhui Polytechnic University, Anhui 241000, China
Xiaoxue Zheng: College of Transportation and Civil Engineering, Fujian Agriculture and Forestry University, Fuzhou 350002, China

Sustainability, 2018, vol. 10, issue 1, 1-31

Abstract: Remanufacturing of returned products has been increasingly recognized in industries as an effective approach to face environmental responsibility, government regulations, and increased awareness of consumers. In this paper, we address a closed-loop supply chain (CLSC) in which the manufacturer produces the brand-new products, as well as the remanufactured goods while the retailer sells these products to customers. We consider several different scenarios: the manufacturer and the retailer adopt a steady-state price or a dynamic price with reference quality effects in a centralized case; either, neither or both the manufacturer and the retailer price dynamically with reference quality effects, respectively, in a decentralized model. We solve the problem with the retailer recycling the sold copies and deduce the optimal pricing strategies while the manufacturer in charge of recovering the used items in such a CLSC. The result shows that dynamic pricing strategies are much more profitable for the supply chain and its members when compared with pricing statically; the dynamic pricing strategies with time-varying quality characterized by reference quality are more suited to a long-term and cooperative closed-loop supply chain. Moreover, the optimal recycling fraction relies on the recovery cost coefficient and proves to be uniform despite adopting a dynamic price and quality in all distinct cases.

Keywords: closed-loop supply chain; dynamic pricing; differential game; reference quality effects (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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