Research On The Pricing Strategy For A Closed-loop Supply Chain With Learning Effect

In the closed-loop supply chain management, the recovery mode selection is important and complicated work, which is a decisive factor in raising the recovery efficiency and profit of the members of the closed-loop supply chain. The unit production cost of new products decreases due to the learning effect which exists in the production process of new products. And the cost variation definitely has a significant impact on the price so that demand for both new products and remanufactured ones. Based on this, this paper combines the learning effect to establish a two-period pricing model of an closed-loop supply chain, and study the effects of different recovery modes and learning effect on the equilibrium decisions and profits of the closed-loop supply chain members, which has great practical significance.In this paper, we develop two-period dynamic programming and dynamic game models of an closed-loop supply chain consisting of a manufacturer and a retailer, in which only new products are produced in the first period, and both new and remanufactured products are produced in the second period. We assume that the manufacturer is responsible for recycling. This paper explicitly considers the constraint from the amount of taken-back waste products on the supply of remanufactured products in the second period and analyzes the effects of different recovery modes, consumer preference, learning effect on the optimal decisions and profits of the members of the closed-loop supply chain. First, we build a two-period model of an closed-loop supply chain without learning effect, and study the pricing strategy under both centralized setting and decentralized setting, then extend the basic model to the retailer recovery mode and compare the equilibrium decisions and profits of the closed-loop supply chain under the two recovery modes. On this basis, we introduce the learning effect and study the pricing strategy of a closed-loop supply chain with linear learning curve and nonlinear learning curve and make a comparison on the optimal decisions and profits under these two kinds of learning curves. The results are mainly summarized as follows:(1) Under manufacturer recovery mode, the wholesale price and retail price of new products in the first period and remanufactured products in the second period is lower than that under retail recovery mode, whereas recovery effort level is higher than that under retail recovery mode. The wholesale price and retail price of new products in the second period are the same in these two recovery modes. Compared with the retailer recovery mode, the closed-loop supply chain can gain "Pareto" improvement in manufacturer recovery mode.(2) We find that the stronger the learning ability, the higher the wholesale price and retail price of new products in the first period, whereas the smaller the wholesale price and retail price of remanufactured products as well as the recovery effort level in the second period. The profits of the closed-loop supply chain and its members are increasing with the learning ability and consumer preferences.(3) Compared with the linear learning curve, the profits of the manufacturer, retailer and closed-loop supply chain are higher in the nonlinear learning curve. This is because with nonlinear learning curve, new products can be produced at a lower unit cost in the second period, which brings more profit for the closed-loop supply chain.The above research provides a decision-making reference for the operations and marketing management for the members of the closed-loop supply chain. For example, enterprises can take measures such as to strengthen consumers’ preference for remanufactured products, reduce production cost of remanufactured products and improve employees’learning ability.