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

Author

Listed:
  • Yuhao Zhang

    (School of Business, Jiangsu University of Science and Technology, Suzhou 215600, China
    School of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai 200433, China)

  • Qian Zhang

    (School of Economics and Management, Huzhou University, Huzhou 313000, China)

  • Ren Hu

    (School of Business, Jiangsu University of Science and Technology, Suzhou 215600, China)

  • Man Yang

    (Logistics Engineering College, Shanghai Maritime University, Shanghai 201306, China)

Abstract

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.

Suggested Citation

  • Yuhao Zhang & Qian Zhang & Ren Hu & Man Yang, 2025. "Optimal Strategy and Performance for a Closed-Loop Supply Chain with Different Channel Leadership and Cap-and-Trade Regulation," Sustainability, MDPI, vol. 17(3), pages 1-41, January.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:3:p:1042-:d:1578447
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    References listed on IDEAS

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