The Effect of Competitive Collection in Closed-loop Supply Chain

Abstract

Recycling and remanufacturing have gained significance and popularity in response to growing environmental concerns and economic pressures. Although previous studies have extensively examined the competitive collection in a closed-loop supply chain, they ignored the pricing decisions in both the forward and reverse channels. In this paper, we develop a two-period analytical framework that considers pricing decisions in both the forward and reverse channels to explore the impacts of competitive collection on optimal prices and profits within a closed-loop supply chain. This study focuses on three distinct used-product collection models: (1) the manufacturer collects used products directly from consumers; (2) the manufacturer outsources the collection activity to a third-party collector (TPC); and (3) the manufacturer and TPC engage in a competitive collection. Our analysis uncovers several intriguing insights. First, competitive collection does not necessarily increase the collecting price for consumers as the TPC prefers to increase its collecting price while the manufacturer prefers to reduce its collecting price. Second, the TPC's increased collecting price does not force the manufacturer to increase his transfer price for the TPC. Third, competitive collection will benefit those consumers who buy the remanufactured product as the price of this product decreases. Fourth, the manufacturer and retailer may be better off directly or through revenue-sharing mechanisms in competitive collection. In addition, the competitive collection could also achieve a win–win situation in terms of financial performance and environmental sustainability. Lastly, when the competitive collection is between the manufacturer and retailer, the manufacturer benefits from the competition but the retailer does not. This paper also discusses the intuition behind these findings and their managerial implications.