Competition between regular and closed-loop supply chains under financial intervention of government; a game theory approach

Governments apply economic incentives and penalties to manage environmental effects of enterprises. Market demands is considered in this research such that non-green and green products can be substituted with each other. We study the competition between two supply chains (SCs) in the market which are called regular and closed-loop SCs. We then formulate a game theoretical model in two scenarios based on collaboration in closed-loop SC and the selling prices, prices of raw materials, and profit of SCs in each scenarios. Numerical examples are presented to make results of the models more tangible. The effects of main parameters of the models are also evaluated through a sensitivity analysis. The results indicate that collaboration between recycler and retailer in the closed-loop SC has significant impact on the profits of the SC’s members. Moreover, the profits of SCs in collaboration between recycler and retailer is higher than non-collaboration scenario.