Competitive Pricing and Remanufacturing Problem in an Uncertain Closed-Loop Supply Chain with Risk-Sensitive Retailers

Abstract

Nowadays, pricing and remanufacturing problems under uncertain markets have gained increasing attention from both industrial and academic fields. In the literature, it is generally assumed that all the channel members are risk-neutral, ignoring the influences of channel members’ risk attitudes in the face of dynamic market. This paper focuses on a pricing problem in a closed-loop supply chain (CLSC) with two competitive risk-sensitive retailers under uncertain environment. The uncertainty is associated with the recycling costs, consumer demands and remanufacturing costs. Due to the dynamic market, supply chain managers may be unable to collect enough historical data to estimate these demands and costs when making pricing and remanufacturing decisions. In such cases, experts’ estimations are usually employed to describe these uncertain parameters. To deal with these human estimations, an uncertainty theory-based model is proposed. Based on the equilibrium results, how the retailers’ risk sensitivity and human estimations (uncertain degrees) affect the prices and profits is analyzed. It is found that both the retailers will get lower profits while the manufacturer will gain more profit when either of the two retailers becomes more risk-averse. We also find that a higher level of uncertainty in the supply chain will induce a higher collecting rate.