Return Policies Under Chain To Chain Competion

Currently, the market competition is beyond the scope of company and focuses more on the scope of supply chain. The return policy, a competition policy, is widely used in the supply chain competition. The existing research found that the return policy could realize the win-win situation for retailer and manufacturer when the demand fluctuates in a reasonable range.We study the strategic importance of return policy under the supply chain competition. Suppose that there are two supply chains. Each supply chain has a manufacturer and a retailer. The manufacturers provide products for retailers at a wholesale price, and manufacturers will buyback the whole or part of the leftover according to the contract. The retailers compete in the sales.In this paper, we discuss the problem from three aspects:manufacturers provide return policy; both manufacturers provide no return policy; one manufacturer provides return policy while the other not. To start with, we consider the case that the return policy is applied into the supply chain competition under the full information. The results show that the manufacturer's profit under this case is higher than that in the case where both manufacturers do not offer return policy. When only one manufacturer offers the return policy, a threshold about the return quantity discount determines which manufacturer has a higher profit. Next, for the partial information structure, we find that the manufacturer's profit is lower than that in full information structure under the same discount and market estimation probability, which indicates the asymmetric information structure, reduces the manufacturer's profit. When only one manufacturer offers the return policy, we derive a discount threshold.This paper not only has a theoretical guidance for the supply chain competition, but also enriches the research on the return policy application and the supply chain competition.