Reward-penalty mechanism for a two-period closed-loop supply chain

This paper examines the benefit of the reward-penalty mechanism (RPM) in a two-period closed-loop supply chain (TPCLSC) where a manufacturer sells new products in the first period, and then commits the collector to collect used products and conducts remanufacturing in the second period. Game-theoretic models are developed to explore and compare the following scenarios, i.e., the TPCLSC with RPM and without RPM. The equilibrium decisions are derived under both cases. The results show that: (i) the government's RPM not only decreases the selling prices in both periods, but also raises the collection rate; (ii) the RPM always results in a profit increase to the collector; (iii) the manufacturer prefers remanufacturing with RPM if the target collection rate is below a threshold; but if the target collection rate is too high, the RPM does harm to the manufacturer regardless of the reward-penalty intensity. Then we examine the differences between a conventional single-period model and our TPCLSC model. The results indicate that: (i) the RPM has a greater effect on the manufacturer in TPCLSC than in a single-period CLSC, particularly in the case of higher reward-penalty intensity; (ii) it is necessary for the government to adopt the RPM to motivate the manufacturer and the collector by setting a reasonable target collection rate and raising the reward-penalty intensity. Our work extends prior research that has only examined CLSC with either RPM or two-period model.