Research On Pricing And Customer Returns Strategies Under Competing Supply Chains

Product pricing and customer returns service are two important marketing strategies for supply chains to gain competitive advantage in the customer market.Facing with high customer returns rates and significant handling costs associated with returns,in addition to downstream retailers who need to choose their customer returns strategies(MBG or no refund),the upstream manufacturers also need to decide whether to offer MBGs to retailers to accept their returned products.This dissertation considers two competing supply chains;each supply chain is consisted of a manufacturer and a retailer,and the manufacturer acts as a Stackelberg leader in the supply chain.Using game theory,customer utility theory,and theories related to supply chain management,this dissertation develops game-theoretic models to study the pricing and customer returns strategies of the manufacturer and retailer in the competing supply chains.The main research and findings of this thesis are summarized as follows.First,the pricing and customer returns strategies of the manufacturer and the retailer in a monopolistic supply chain are studied as a benchmark model.The results show that offering an MBG increases the wholesale price and retail price.The retailer’s choice of customer returns strategy depends on the net salvage value of the returned product.That is,if the net salvage value of the returned product is positive,the retailer should offer an MBG,and otherwise no refund.For the manufacturer,however,it will offer an MBG to the retailer to accept the retailer’s returned product only when the net salvage value that the manufacturer can gain from the returned product is positive and is greater than that of the retailer.Second,the pricing and customer returns strategies of the manufacturers and the two retailers under the two competing supply chains are examined to explore the impacts of market competition.The results show that the competitive environment increases the likelihood that the manufacturer offers an MBG for its retailer.The manufacturer will offer an MBG to its retailer as long as the manufacturer has a positive net salvage value from handling the returned product.Furthermore,the manufacturer’s MBG strategy motivates the retailer to offer an MBG to the customer.This finding suggests that the manufacturer’s choice of returns strategy affects the retailer’s decision on customer returns strategy in the competitive environment.Finally,the impacts of MBGs on the profits of the two manufacturers and the two retailers are investigated by comparing their profits between the cases when they offer MBGs and when they do not offer MBGs.The results show that when the difference between the two supply chains’ ability in handling the returned products is sufficiently large,offering MBGs not only can result in a Pareto improvement in both manufacturers’(retailers’)profits,but also may lead to a prisoner’s dilemma in which both manufacturers(retailers)lose profit.