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Int J Environ Res Public Health. 2018 Dec 14;15(12). pii: E2870. doi: 10.3390/ijerph15122870.

Fair but Risky? Recycle Pricing Strategies in Closed-Loop Supply Chains.

He J1, Zhang L2, Fu X3, Tsai FS4,5,6.

Author information

1
School of Economics and Management, Chongqing University of Posts and Telecommunications, Chongqing 400065, China. hejh@cqupt.edu.cn.
2
School of Economics and Management, Chongqing University of Posts and Telecommunications, Chongqing 400065, China. hjh69@sina.com.
3
School of Economics and Management, Chongqing University of Posts and Telecommunications, Chongqing 400065, China. Xiao.fu@yangtzelaw.com.cn.
4
Department of Business Administration, Cheng Shiu University, Kaohsiung 833, Taiwan. tsaifs@gcloud.csu.edu.tw.
5
Center for Environmental Toxin and Emerging-Contaminant Research, Cheng Shiu University, Kaohsiung 83347, Taiwan. tsaifs@gcloud.csu.edu.tw.
6
Super Micro Mass Research and Technology Center, Cheng Shiu University, Kaohsiung 83347, Taiwan. tsaifs@gcloud.csu.edu.tw.

Abstract

We argue that a Nash bargaining model with behavioral factors (i.e., fairness concern and risk aversion) should be introduced to the price strategizing process in the context of a closed-loop supply chain. We consider three different pricing models: The first is when both the manufacturer and the retailer have fairness concerns; the second is when both the manufacturer and the retailer have risk aversion; and the final is when the manufacturer has risk aversion but the retailer has both risk aversion and fairness concern. Then we examine the model with game theory. The results have shown that fairness and risk aversion change the optimal pricing strategy, which affects the expected profits of retailers and manufacturers. The impacts of two (relatively irrational) behavioral factors on the wholesale and retail prices of new products, the recycle price and recycle transfer price of the waste products, are not the same. For new products, the wholesale price is most affected by behavioral factors and the sales price scores second. For waste recycling products, the transfer price is most affected by behavioral factors and the recycle price scores second. When considering fairness and risk aversion in retail, fairness concern is good for both manufacturers and retailers. This innovative pricing strategy model adds implications for sustainability in supply chain operations.

KEYWORDS:

closed-loop supply chain; fairness concerns; irrational behavior education; pricing strategy; risk aversion

PMID:
30558220
DOI:
10.3390/ijerph15122870
[Indexed for MEDLINE]
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