A Coordinated Revenue-Sharing-Based Pricing Decision Model for Remanufactured Products in Carbon Cap and Trade Regulated Closed-Loop Supply Chain

TLDR

Pricing remanufactured products is crucial for economic benefits, yet centralized or decentralized strategies fail to reflect true manufacturer and retailer profits when carbon emission costs under cap‑and‑trade are considered. This study introduces a revenue‑sharing contract to coordinate optimal pricing for manufacturers and retailers engaged in remanufacturing. The model incorporates varying willingness to pay and profit distribution under cap‑and‑trade, deriving optimal new and remanufactured product prices through convex programming and validating feasibility with numerical experiments. Results show that higher carbon caps lower retail prices of both product types, retailers’ profits rise with the cap while manufacturers’ profits follow an inverted‑U relationship, and both parties’ profits increase with willingness to pay.

Abstract

The pricing strategy of remanufactured products has been widely regarded as a significant issue due to the associated economic benefits for both suppliers and retailers awareness worldwide. However, the overall profit determined based on centralized pricing strategy or decentralized pricing strategy is not in line with the actual profit of the manufacturer and the retailer, especially when taking the cost of carbon emission under the system of cap and trade into account. This paper proposes a revenue sharing contract model to coordinate the optimal pricing strategies for both manufacturers and retailers who engages in remanufacturing. The model considers the different Willingness to Pay (WTP) for remanufactured products, and profit distribution of manufacturers and retailers under the Cap and Trade policy. The optimal retail and wholesale price of new products and remanufactured products are derived by solving a convex programming model. Our results identify that: (1) The carbon emission cap is negatively correlated with the retail price of both new products and remanufactured products when the established profits function of the closed-loop supply chain is set to be a constant. The retail price of remanufactured products is also negatively correlated with the value of WTP, while the retail price of new products is positively correlated with WTP. (2) The profit of retailers is positively correlated with carbon emission cap, while the relation of the manufacturer's profit and carbon limit present an inverted U shape, which indicates the optimal carbon emission limit for manufacturers achieving the maximum profit. Moreover, the profit of the retailer and manufacturer and the coefficient of WTP is positively correlated. Numerical experiments are conducted to examine the feasibility of the proposed pricing strategies and gain optimal managerial insights for carbon cap and trade policy.