Decentralized Decision-Making Model for Closed-Loop Supply Chain with Remanufacturing Considering Premium & Penalty Mechanism of Government

Taking a typical closed-loop supply chain (CLSC) system which consists of a single supplier and retailer as the research objective, this study intends to find optimal decisions for all companies in CLSC system under premium & penalty mechanism of government working on the reverse logistics enterprises. A decentralized decision model is established based on the game theory, which simultaneously determines the optimal decision of all parties mentioned and shows the influence of premium & penalty mechanism of government on the closed-loop supply chain. The conclusions are as follows: (1) The premium & penalty mechanism of government contributes to increasing retailers’ profit; (2) Whether the premium & penalty mechanism of government positively influence the recycling rate of reverse logistics enterprise or not depends on the interaction of premium & penalty coefficient k and recycling fixed cost coefficient C0. (3) If fixed cost recovery coefficient meets certain conditions, the efficiency of the closed-loop supply chain will be improved. So, reducing the recovery cost is essential to promote the efficient of closed-loop supply chain. The results of this paper not only have a practical effect on promoting the efficiency of CLSC with remanufacturing, but also provide a decision-making reference for the government to make recycling and reusing policy of renewable resources.