| In this paper, we study a closed-loop supply chain (CLSC) consisting of a manufacturer and a retailer of a single product with numerous end product customers. The key feature differentiating this paper from the extant literature in CLSC is that our model is retailer-driven while the traditional CLSC models have been manufacturer-driven. This study is motivated by the emergence of super retailers such as Wal-Mart. Under these circumstances, we show how the retailer leads and the manufacturer follows in determining the wholesale and retail prices in the forward flow and the used product collecting and return prices in the reverse flow. In particular, we show via numerical examples a loss leader pricing behavior of the retailer who intentionally loses money for each unit returned in the reverse flow so as to make the maximum total profit considering both forward and reverse flows. Next, we investigate a centrally coordinated CLSC of the retailer and the manufacturer as well as the manufacturer-driven model, and compare the price and profit implications with the retailer-driven model. Also, we examine various ramifications of the retailer-driven model with respect to the coordination mechanisms, policy implications, and third-party logistics. |
