Pricing models in a sustainable supply chain with capacity constraint

Abstract

Abstract In this paper, we investigate a closed-loop supply chain with one supplier and one third-party collector who compete with each other and have more pricing power than the manufacturer with production capacity constraints. The optimal pricing, recycling and remanufacturing strategies are derived. Three pricing models are proposed to discuss strategies under different scenarios: the supplier-led Stackelberg game model, the third-party collector-led Stackelberg game model and the Nash game model. Through theoretical analysis and numerical studies, it is found that (1) strategies such as advertising and promotion can gain more market preference for managers yet cause a dilemma for the supplier who must balance between profit and supply chain sustainability when choosing these strategies; (2) the supplier or the third-party collector gain more profit when they act as the follower and the supplier-led game scenario is the best scenario for the recycling and remanufacturing activities in the supply chain; (3) it is also a dilemma for the supplier to balance between profit and supply chain sustainability when choosing a decision sequence.