Retailers' competition and cooperation in a closed-loop green supply chain under governmental intervention and cap-and-trade policy

This paper investigates retailers' competition and cooperation in a closed-loop green supply chain consisting of one common manufacturer and two competing retailers under governmental intervention and cap-and-trade policy. Considering a consistent pricing strategy of the manufacturer, this study develops one centralized policy and three manufacturer-led decentralized policies viz. Collusion, Cournot (Nash), and Stackelberg depending on different competitive behaviors of the retailers. Optimal decisions are compared analytically through a special case where the retailers face the same basic market, and numerically where they face both the same basic market and different basic markets. A transfer payment mechanism is developed so that all the channel members achieve Pareto improvement. Numerical results indicate that (1) among the three decentralized scenarios, Nash behavior is profitable to the manufacturer, customers, and the whole supply chain, but Collusion behavior is profitable to the retailers only when the difference of their basic markets is small, (2) when the retailers face the same basic market and play Stackelberg game, it is beneficial for the retailers to be follower rather than leader, and (3) occurrence of both the government subsidy and cap-and-trade policy is profitable to all the channel members.