Pricing strategy and collection rate for a supply chain considering environmental responsibility behaviors and rationality degree. (July 2022)

• Record Type: Journal Article
• Authors: Wen, Danping; Xiao, Tiaojun; Dastani, Mehdi
• Is Part Of: Computers & industrial engineering. Volume 169(2022)
• Publication Date: 2022-07
• Subjects: Supply chain management -- Pricing strategy -- Environmental responsibility behavior -- Bounded rationality -- Game theory; Engineering -- Data processing -- Periodicals; Industrial engineering -- Periodicals; 620.00285
• DOI: 10.1016/j.cie.2022.108290
• Languages: English
• ISSNs: 0360-8352

Abstract

Highlights: Pricing strategy choice and optimal collection rate for a supply chain are studied. Impacts of environmental responsibility and rationality degree are explored. The retailer still stocks remanufactured products without obtaining any benefit. Differentiated-pricing may benefit the manufacturer but hurt the retailer. A low bounded rationality level enhances the incentive for differentiated-pricing. Abstract: Owing to the coexistence of environmental pollution and green behaviors, optimizing pricing strategy and collection rate is a growing concern. We develop game-theoretical models to investigate these issues in a supply chain considering environmental responsibility behaviors under two scenarios, perfect rationality and bounded rationality. Equal-pricing and differentiated-pricing strategies are given special attention. Under perfect rationality, we find that: (i) for a high unit environmental cost of uncollected used products, to optimize collection rate, the manufacturer makes a trade-off between total environmental cost reduction and the investment in collecting used products, rather than consumers' demand; (ii) the retailer's profitability for remanufactured products depends on green consumers partly or fully accepting remanufactured products, especially under equal-pricing; and (iii) when green consumers partly accept remanufactured products, for a medium green consumers' acceptance degree and a low ordinary consumers' acceptance degree, differentiated-pricing benefits the manufacturer but hurts the retailer. When there are enough green consumers, the retailer's interests are aligned with the manufacturer and the supply chain under differentiated-pricing. Under bounded rationality, we find that: (i) compared with perfect rationality, the manufacturer and the retailer decrease the prices for new products and collection rate, and increase the price for remanufactured products, especially under differentiated-pricing; (ii) for a low bounded rationality level, the manufacturer and supply chain are better off by using differentiated-pricing; and (iii) consumers' multi-dimensional heterogeneities and purchasing uncertainty play important roles in choosing an optimal pricing strategy.