Pricing Strategies in Dual-Channel Reverse Supply Chains Considering Fairness Concern

Area of Science:

• Operations Research
• Supply Chain Management
• Environmental Economics

Background:

• The recycling industry faces intense competition and rapid technological advancement, leading to dual-channel reverse supply chains (online and offline).
• The integration of online channels introduces complexities in profit distribution and fairness considerations between recycling centers and third-party recyclers (TPR).

Purpose of the Study:

• To analyze how fairness concerns of recycling centers and TPRs influence optimal pricing and revenue within a dual-channel reverse supply chain.
• To investigate the impact of varying fairness concern coefficients on pricing strategies and overall supply chain system revenue.
• To provide guidance for recycling enterprises on making pricing decisions that account for fairness concerns to maximize profits.

Main Methods:

• Development of Stackelberg game models to represent three scenarios: both parties neutral, only TPR has fairness concerns, and only the recycling center has fairness concerns.
• Analysis of pricing and revenue outcomes under different fairness concern levels.
• Example-based analysis to validate model results and explore the impact of the fairness concern coefficient.

Main Results:

• When only the TPR exhibits fairness concerns, their profits increase, while the recycling center's profits and offline channel transfer prices decrease.
• When only the recycling center has fairness concerns, it leads to reduced recycling prices, offline channel transfer prices, and overall supply chain profits.
• The impact of the fairness concern coefficient on pricing and revenue is more pronounced at lower levels for both recycling centers and TPRs.

Conclusions:

• Fairness concerns significantly alter pricing and revenue distribution in dual-channel reverse supply chains.
• The specific party exhibiting fairness concerns dictates the direction and magnitude of changes in profits and transfer prices.
• Understanding and incorporating fairness concerns into pricing models is crucial for optimizing supply chain performance and profitability in the recycling industry.