Cost-sharing strategy for recycling and service investment in a closed-loop supply chain

Abstract

This paper investigates the cost-sharing strategies of a manufacturer, a retailer and a third-party recycler in a Stackelberg game considering government subsidy and retailer’s service effort. Next, we construct profit functions of the manufacturer, the retailer and the third-party recycler considering government subsidy and service effort for four scenarios: no cost-sharing (N), service investment cost-sharing (I), recycling investment cost-sharing (II), and both service and recycling investment cost-sharing (III). Furthermore, we obtain the optimal results and discuss the impact of cost-sharing ratio, service cost coefficient, government subsidy and service sensitivity coefficient on profits and social net benefits. The results show that the service investment cost-sharing strategy cannot achieve profit coordination, and under certain conditions, the recycling investment cost-sharing strategy and the service and recycling investment cost-sharing strategy can achieve profit coordination. In addition, changes in different factors such as government subsidy, service cost coefficients, and service sensitivity coefficients will affect the effectiveness of cost-sharing strategies.