Dynamic Pricing with Reference Quality Effects in Closed-Loop Supply Chain

With the development of economic progress, dynamic pricing, as a powerful strategy to improve company profits, has been extensively adopted by companies worldwide. However, there are little researches which pay close attention to the effects of dynamic pricing on closed-loop supply chain (CLSC) performance. We consider a Stackelberg game between one manufacturer and one retailer where the manufacturer, as the leader, decides the product quality and the wholesale price, and the retailer, as the follower, sets the retail price. By analyzing, we obtain the following conclusions: It is the best for the manufacturer, the retailer and the whole supply chain to adopt dynamic pricing strategies compared with static pricing strategies both in integrated and decentralized case. In dynamic pricing strategies, the manufacturer should take a higher recycling rate where the recovery cost is low while should take a lower recycling ratio where the recovery cost is high.