Abstract:

Companies establish closed-loop supply chain （CLSC） via trade-in mechanism， which is a way of circular economy， attracting consumers to spontaneously participate in the reverse logistics process， which can not only promote repurchase level but also realize the environmental-friendly green supply chain establishment. It focuses on the supply chain structural differences under trade-in mechanism in this study. Four structural differentiated trade-in CLSC Stackelberg game scenarios are modeled in a supply chain including a manufacturer and a retailer from two dimensions—the supply chain leader and trade-in service provider （whether to outsource the service）. The market is segmented based on the customer categories and a return function is used to describe the total amount of used products collected via trade-in service， which is alse the demand realized in this channel because of the inherit character of trade-in mechanism （when a used product is returned a new product is sold at the same time）. The four scenarios established and discussed in the paper according to the two dimentions above are： （i） scenarioM(I) in which the manufacturer is the leader of the supply chain and also the trade-in service provider； （ii） scenarioR(I)in which the manufacturer is the leader of the supply chain and outsources the trade-in service th the retailer； （iii） scenarioM(II)in which the retailer is the leader of the supply chain but the trade-in service is provided by the manufacturer； and （iv） scenarioR(II)in which the retailer is the leader of the supply chain and also provides the trade-in service. The Stackelberg equilibrium of each scenario is solved and discussed in this paper and a numerical study done by using mathematica is also delivered to support analytic results， show those results more visually and explore those equilibrium solutions more deeply. The results from both analytic and numerical studies show that： （1） both the manufacturer and the retailer prefer to provide trade-in service themselves when there is no transfer payment， and such divergence will be deeper when the gap between the new customers market potential and the replacement one is larger； （2） when the leader is fixed， the total supply chain profit is always higher when the manufacturer provides trade-in service； （3）the manufacturer will provide the trade-in service herself when she is the leader of the supply chain， and the retailer who does not participate in the trade-in service and related reverse channel will secure a part of the profit of reverse channel from higher forward markup； （4） the retailer tends to ask the manufacturer to outsource the service when leading the supply chain and the manufacturer can fill the retailer’s profit gap via transfer payment and reach an agreement so that she can provide the service herself and maximize the total CLSC profit. According the results and analysis in this study， a theoretical basis can be provided for enterprises and supply chains who planning to provide trade-in service， helping them to choose optimal strategies acccording to the market environment and the supply chain structure and determine their optimal prices and trade-in rebate.

Key words: trade-in, closed-loop supply chain, supply chain structure, game theory