Pricing, collecting and contract design in a reverse supply chain with incomplete information

- The supply of the used product is jointly affected by the acquisition price and the collection effort level.
- The decentralized reverse supply chain models are established under complete and incomplete information.
- The equilibrium decisions and optimal profits are compared under two information structures.
- We propose a two-part tariff contract under incomplete information to improve channel performance.

The significance of the reverse supply chain management and remanufacturing operations has been gaining increased attention in the literature and in practice. In this paper, we address the problem of how to make pricing, collecting and contract design decisions in a reverse supply chain, which consists of a collector and a remanufacturer. Two non-cooperative game models are established under complete and incomplete information scenarios, respectively. To begin with, we obtain the equilibrium pricing and effort decisions under complete information case. Then, the first-order conditions that the optimal acquisition price, optimal collection effort, optimal wholesale price and optimal retailing price satisfy are given under incomplete information. The result shows that the incomplete information structure might lead to an efficiency loss in the reverse supply chain. Hence, we then introduce a two-part tariff contract for the remanufacturer to motivate the collector to reveal private information, which can effectively improve the channel performance. Finally, we conduct numerical examples to compare the equilibrium solutions under different models and make the sensitivity analysis for some model parameters.