Effects of Network Externalities and Recycling Channels on Closed-loop Supply Chain Operation Incorporating Consumers’ Dual Preferences

Abstract

Consumers’ awareness of environmental protection is gradually strengthened, and they often consider environmental protection characteristics of products during purchasing products. Based on the characteristic of consumers’ dual preferences for product quality and environmental friendliness, this paper constructs a novel closed-loop supply chain with network externalities for new products and remanufactured products under different waste product recycling channel strategies. It discusses the influence of product recycling channel strategies and network externalities on the optimal decision of the company. By establishing the Stackelberg game model, the analysis found that the retail price of new products and remanufactured products is not affected by network externalities and recycling channel strategies, even if the wholesale price of remanufactured products increases with the influence of network externalities. The changing trend of market demand for new products and remanufactured products is different between products with network externalities and without network externalities. When the cost of remanufactured products is within certain range, the existence of network externalities makes the market demand for new products and remanufactured products increase simultaneously. Our study also found that even if products have positive network externalities that increases consumer utility, when the cost of remanufactured products is outside certain range, the company’s profit will be higher when products have no network externalities than that when products have network externalities.

Pricing and Sales Effort Decisions in a Closed-Loop Supply Chain Considering the Network Externality of Remanufactured Product

“…For instance, Zhou et al [8] introduced the theory of network externality to explore the impact of government subsidy with or without budget constraint on OEM decision making. Xie et al [27] examined the impact of network externality on CLSC members decision making with different waste recycling channel strategies considering consumers' dual preference for product quality and environmental friendliness. They found that the demands of both new and remanufactured products with network externalities are greater than those of products without network externalities.…”

“…However, the above works consider network externality in the traditional supply chain, and few studies focus on the network externality characteristic of remanufactured products, except for Zhou et al [8] and Xie et al [27]. Differing from the above-mentioned studies, our paper examines the problems of CLSC members' optimal differential pricing and sales effort decisions considering the network externality of remanufactured product.…”

Authorization or Outsourcing: Considering the Contrast/Assimilation Effect and Network Externality of Remanufactured Products under Government Subsidy

“…For example, Zhou and Yuen [8] incorporated the network externality of remanufactured product into the model, and examined the optimal strategies for the OEM and the government. Xie et al [32] analyzed enterprises' optimal de-cisions with different used-product recycling channels based on consumers' dual preference for product quality and environmental friendliness and network externality for new and remanufactured products. However, except for Zhou et al [8] and Xie et al [32], the above research focuses on network externality of the traditional product, and few works focus on the network externality of remanufactured products.…”

“…Xie et al [32] analyzed enterprises' optimal de-cisions with different used-product recycling channels based on consumers' dual preference for product quality and environmental friendliness and network externality for new and remanufactured products. However, except for Zhou et al [8] and Xie et al [32], the above research focuses on network externality of the traditional product, and few works focus on the network externality of remanufactured products. Differently from the aforementioned studies, our paper explores CLSC members' optimal strategies incorporating the network externality of remanufactured products into the research framework.…”

Dynamic Research on Three-Player Evolutionary Game in Waste Product Recycling Supply Chain System

“…Using classical game theory to solve supply chain problems is very common [36], and most of the supply chain participants in these studies are completely rational [20,37]. However, in reality, the game participants are often bounded rational [38].…”