Cooperative advertising in a closed-loop supply chain to encourage customers to return their used products

Abstract

In this paper, two non-cooperatives and one cooperative game are established in order to investigate the effectiveness of cooperative advertising in a closed-loop supply chain with one manufacturer and one retailer. In a closed-loop supply chain, companies tend to increase the return rate of used products. Therefore, the retailer spends for green advertising in order to encourage customers to return their used products by increasing their concerns and awareness about environmental issues. On the other hand, the manufacturer spends on national advertising to create an image of the product and enhance its sale. Since in the manufacturer's point of view, remanufacturing used products is more profitable than manufacturing new ones, he prefers to give some incentives such as participating in the retailer's green advertising expenditure and paying return costs per unit of returned products to the retailer to collect more used products. Results show that both channel members spend their highest and lowest advertising expenditures in cooperative and Nash game, respectively. Also, the higher the differences between the costs of manufacturing new and remanufacturing used products, the more willing the manufacturer is to participate in the retailer's green advertising expenditure.