PRICING DECISIONS FOR CLOSED-LOOP SUPPLY CHAINS WITH TECHNOLOGY LICENSING AND CARBON CONSTRAINT UNDER REWARD-PENALTY MECHANISM

Abstract

This paper investigates the effect of the reward-penalty mechanism in a closed-loop supply chain with a manufacturer, a distributor and a third party under technology licensing and carbon constraints. There remanufacturing scenarios are developed, namely (1) the manufacturer is engaged in remanufacturing activities, (2) the manufacturer subcontracts the distributor to conduct remanufacturing, and (3) the third party undertakes remanufacturing with the manufacturers authorization. We apply the Stackelberg game to derive the equilibrium strategies of each scenario with and without rewardpenalty mechanism. We find that, the implementation of the reward-penalty mechanism is profitable to remanufacturing activities. If producing remanufactured products doesnt effectively reduce carbon emissions, chain members have no incentive to undertake collecting and remanufacturing activities. The manufacturer prefers to license other chain members to remanufacture because more cost savings from remanufacturing and more rewards from government can achieve in distributor-remanufacturing and third-party remanufacturing scenarios