Game Theoretic Analysis of A Closed-loop Supply Chain with Backup Supplier under Dual Channel Recycling

Abstract In a recent article, Jafari et al. (2017) considered dual-channel recycling in a closed-loop supply chain (CLSC) consisting one collector, one recycler and one manufacturer. In this paper, their model is extended with a backup supplier considering uncertainty of collection of used products. The shortfall quantity of collection is met up by the backup supplier with the estimated fresh raw materials. Under various power structures or interactions of the supply chain entities, different game theoretic models are developed. It is observed from the numerical study that, depending on the fractional part of the manufacturer’s requirements of recyclable wastes supplied by the collector, the performance of the supply chain increases compared to that of Jafari et al.’s (2017) model in the absence of the recycler. However, in the presence of the recycler, the whole supply chain’s profit surpasses Jafari et al.’s (2017) profit for any amount of used product collection.