Optimal Pricing Strategies for Heterogeneous Customers in Dual-Channel Closed-Loop Supply Chains: A Modeling Approach

TL;DR

This paper develops a game-theoretic model to determine optimal pricing and subsidy strategies in dual-channel closed-loop supply chains, considering customer preferences and different recycling frameworks to enhance profitability and sustainability.

Contribution

It introduces a novel modeling approach that incorporates primary customer channel preferences and various recycling structures into DCCLSC pricing strategies.

Findings

Manufacturers set lower prices in direct channels to stimulate demand.

Retailer-led recycling requires higher subsidies to promote trade-ins.

Collaborative recycling results in lower prices and increased trade-ins.

Abstract

Dual-channel closed-loop supply chains (DCCLSCs) play a vital role in attaining both sustainability and profitability. This paper introduces a game-theoretic model to analyze optimal pricing strategies for primary and replacement customers within three distinct recycling frameworks: manufacturer-led, retailer-led, and collaborative recycling. The model identifies equilibrium pricing and subsidy decisions for each scenario, considering the primary customer's preference for the direct channel and the specific roles in recycling. The findings indicate that manufacturers tend to set lower prices in direct channels compared to retailers, aiming to stimulate demand and promote trade-ins. Manufacturer-led recycling initiatives result in stable pricing, whereas retailer-led recycling necessitates higher subsidies. Collaborative recycling strategies yield lower prices and an increase in trade-ins. Primary customers' preference for the direct channel significantly impacts pricing strategies, with a stronger preference leading to lower direct-channel prices and higher manufacturer subsidies. This paper contributes to the field by incorporating primary customer channel preferences and diverse recycling frameworks into DCCLSC pricing models. These insights assist manufacturers and retailers in adjusting pricing strategies and trade-in incentives according to primary customer preferences and associated costs, thereby enhancing profitability and recycling efficiency within DCCLSCs.