A Game-Theoretic Approach for Pricing Considering Sourcing, Andrecycling Decisions in a Closed-Loop Supply Chain Under Disruption

Nowadays, Pricing and sourcing under supply disruption risk playing a prominent role in the efficiency and responsiveness of a supply chain. However, being environmentally responsible is a vital element in regard to reputation enhancement and passing legislative requirements. This paper investigates two competing closed-loop supply chains: 1) a retailer with an expensive but reliable domestic supplier and cheap but unreliable foreign supplier, 2) a competitor with its integrated supplier. The retailer and competitor compete based on the game theory approach to decide on prices and return policies and prices when the retailer confronts disruption risk by the foreign supplier. The reverse supply chain is addressed by asking the retailer and a competitor to collect used products for recycling purposes by suppliers. The suppliers decide on the value paid for each the used product collected by retailers. The results indicate that in the dual sourcing situation there is a direct correlation between supply from a foreign supplier, and the return rate of used products. Besides, the competitor and its integrated supplier have to use the return policy as leverage to revive the competitive market.