Optimal Strategy and Performance for a Closed-Loop Supply Chain with Different Channel Leadership and Cap-and-Trade Regulation

Cap-and-trade is widely recognized as an effective mechanism for curbing carbon emissions, and it significantly influences the operational decisions within supply chains. This study investigates a three-echelon closed-loop supply chain (CLSC) consisting of one original equipment manufacturer, one traditional retailer, and one independent third-party collector. The manufacturer invests in cleaner technologies to produce green products and remanufactures new products from used items recycled by the third-party collector. Considering different channel power structures, three Stackelberg game models are developed, and their optimal solutions are derived using the backward induction. Additionally, the combined effects of remanufacturing-related and carbon-related parameters on economic and environmental benefits as well as social welfare are investigated under different settings. Moreover, the derived results are validated via numerical simulation. The findings indicate that: (1) Each channel member is incentivized to act as the leader role within the CLSC to maximize profits. (2) A loose cap-and-trade regulation is conducive to enhancing the emission abatement rate, collection rate, and overall performance for the CLSC. (3) The retailer-led model is the best option for capturing more economic benefits and social welfare, while the third party-led model can always achieve the best environmental performance regardless of carbon trading price. These research findings can provide valuable insights for policymakers and decision makers engaged in CLSC.