An analysis of equilibrium coordination incentives in reverse supply chains

Abstract

This paper investigates the issue of coordination in reverse supply chains, modelling the decision problems of coordinating parties (i.e. manufacturer and retailer). To capture the existing feedbacks in the above model and the resulting delays, a system dynamics approach is employed. A typical reverse supply chain initiates when the manufacturer offers a revenue sharing scheme and the retailer responds to it by setting an incentive for returns. This resembles a leader-follower (Stackelberg) strategic decision making game, with an equilibrium solution that causes a lower performance for environmental criteria. In this sense, we further investigate if a coordination scheme can be orchestrated, under a carbon tax or cap-and-trade scenario, such that to yield a higher environmental performance