Optimal decision problem in a three-level closed-loop supply chain with risk-averse players under demand uncertainty

Abstract

In this paper, a stochastic model of a closed-loop supply chain (CLSC) with one risk-averse manufacturer, one risk-averse retailer and one risk-averse third party is developed. To analyze how the members make decisions about wholesale price, collection rate, retail price and sales effort under different decision-making structures, the optimal decision problem under uncertain price and sales effort-dependent demand is studied through development of four game theoretical models. The equilibrium results between various models are compared and the optimal decisions from each member's perspective are investigated. According to the results, the third party-led model has better performance than manufacturer-led model. The cooperation mode of manufacturer and retailer is beneficial for the whole chain and customers and the cooperation mode of manufacturer and third party is the most effective model to collect the used-product. Finally, to increase the performance of decentralized CLSC compared with the centralized CLSC, a coordination contract is developed. The results indicate that this contract is advantageous for the members of CLSC, the customers, and the environmental issues.

Sustainable development: Impacts of consumers' risk aversion on remanufacturing model selection and environmental performance

“…Yoo (2014) considered a supply chain with a risk‐averse supplier and studied the firms' product quality and return strategy. Alamdar, Rabbani, and Heydari (2019) addressed the optimal decisions in a supply chain consisting of a risk‐averse manufacturer, a risk‐averse retailer, and a risk‐averse third party. These works mainly focus on how the firms' risk aversion affects the other parties' decisions.…”

Blockchain Adoption for Generic Drugs in the Medicine Supply Chain with Consumers’ Risk-Aversion: A Game-Theoretic Model Within Chinese Legal Framework

“… 26 Alamdar et al investigated the choice of pricing and collection strategies in a closed-loop supply chain with a single risk-averse manufacturer, retailer, and third party under uncertain demand. 27 Abbey et al examined the influence of risk preferences on consumers’ willingness to pay (WTP) for remanufactured products and found that the WTP data can be reasonably explained by a typical utility model with risk aversion and that ambiguity aversion does not play a significant role in consumers’ choices. 28 Deng examined how consumers’ risk aversion affects the choice of remanufacturing models and the environmental performance of the supply chain and assessed the environmental effects of each model and examined the best choices and profits made by supply chain participants under various models.…”

Pricing and coordination in a green supply chain with a risk-averse manufacturer under the reference price effect

“…The risk-aversion behavior of supply chain members affects the decision-making of the supply chain system. Researchers have considered risk-averse supply chain pricing strategies (Liu et al, 2016); other researchers investigate the impact of risk aversion on pricing and supply chain coordination from the perspectives of demand uncertainty and asymmetric information (Xiao and Yang, 2008;Li et al, 2017;Alamdar et al, 2019;Bai et al, 2020).…”