Pricing Decision of Closed-Loop Supply Chain to Improve Service Level under Patent Protection

Abstract

This paper constructs a two-level closed-loop supply chain system consisting of original parts manufacturers and parts distributors. Based on the different preferences of consumers for remanufactured parts and new parts, four combination models of patent protection and service improvement are constructed. Through comparative analysis, the impact of implementing patent protection policies by original parts manufacturers and improving service levels by parts distributors on the pricing decisions of the closed-loop supply chain is explored.Through the comparison between related models and the verification of calculation examples, it is found that (1) a manufacturer prevents the price of new products from being affected by the price of remanufactured products and upgrading of service level by introducing royalties, which reduces its loss of profit; (2) in the absence of patent protection, the manufacturerꞌs profit decreases as the level of service increases; in the presence of patent protection, the manufacturerꞌs profit increases as the level of service increases; (3) retailersꞌ profits decrease after the manufacturer introduces royalties, which discourages them to improve service levels for remanufactured products; (4) as retailers raise the service level of the remanufactured products, the profits of the manufacturer and third-party manufacturers keep increasing, while the profits of the retailers first increase and then decrease.