Game Theoretic Analysis of Pricing and Cooperative Advertising in a Reverse Supply Chain for Unwanted Medications in Households

Abstract

Improper disposal of household unwanted medications (UMs) is an emergency problem around the world that adversely affects the sustainability of the environment and human's health. However, the current disposal practices, mainly based on advertising and collecting status, are unsatisfactory in most countries and regions. Thus, some scholars proposed an alternative disposal practice that is to provide incentives to customers. This study aims to compare a Single Model (advertising only) with a Joint Model (advertising with take-back pricing) in a two-echelon reverse supply chain (RSC) that is composed of one disposer and one collector. In each model, four games (non-cooperative, collector as the Stackelberg leader, disposer as the Stackelberg leader, and cooperative) were established in order to identify the optimal pricing and advertising strategies for both members. The results of the study indicate that there is a Pareto dominant range for Joint Model compared to Single Model, whereas Single Model has no Pareto improvement in any games. Furthermore, in non-cooperative games of Joint Model, it is better to implement the leader-follower structure rather than simultaneous movement structure. Additionally, it is verified that the cooperative game is feasible, which leads to the cooperation between the disposer and the collector, and the extra profit from the cooperation can be shared based on the Nash bargaining game. However, in Single Model, it is better for the disposer to act as a channel leader and the collector figures the follower.

Material convergence issue in the pharmaceutical supply chain during a disease outbreak

“…Narayana et al (2019) adopted SD to explore potential policies for reverse logistics in PSC. Only a few authors have attempted to resolve medicinal waste by exploring reverse logistics in the PSC (Hua et al, 2017;Huang et al, 2015;Weraikat et al, 2016). This sub-section confirms that PSC counters various operational issues, and pharmaceutical waste has become a significant concern among the PSC stakeholders.…”

“…(2019) adopted SD to explore potential policies for reverse logistics in PSC. Only a few authors have attempted to resolve medicinal waste by exploring reverse logistics in the PSC (Hua et al. , 2017; Huang et al.…”

Evaluation of Medicine Reverse Logistics Practices in Hospitals

“…In the context of "Financial Incentive", the practice with the highest priority, Hua et al [38] designed an approach offering incentives to pharmacies to encourage the return of medicines with high levels of stock and less demand before expiration. Only one hospital reported being able to negotiate the return of leftover medicines with suppliers; this negotiation is pre-agreed before the purchase, which guarantees security to the buyer.…”

Research on Coordination Complexity of E-Commerce Logistics Service Supply Chain

“…Yan et al [8] used game theory to study the pricing strategy in a dual channel supply chain consisting of a supplier with limited capital and an e-retailer providing capital. Hua et al [9,10] proposed four games to investigate the optimal pricing strategy in a two-echelon reverse supply chain.…”