Warranty Decision Model and Remanufacturing Coordination Mechanism in Closed-Loop Supply Chain: View from a Consumer Behavior Perspective

Abstract

The remanufacturing warranty strategy has become an effective mechanism for reducing consumer risk and stimulating market demand in closed-loop supply chain management. Based on the characteristics of consumers' behavior of purchase decisions, this paper studies the warranty decision model of remanufacturing closed-loop supply chain under the Stackelberg game model. The present study discussed and compared the decision variables, including remanufacturing product pricing, extended warranty service pricing, warranty period and supply chain system profit. The research shows that consumers' decision-making significantly affirms the dual marginalization effect of the supply chain system while significantly affecting the supply chain warranty decision; the improved revenue sharing contract and the two charge contracts respectively coordinates the manufacturer-led and retail-oriented closed-loop supply chain system, which effectively implements the Pareto improvement of the closed-loop supply chain system with warranty services. In the present study, the model is verified and analyzed by numerical simulation.Sustainability 2018, 10, 4738 2 of 21 in determining the total cost of the product (Shafiee and Chukova, 2013 [4]). A satisfactory warranty policy will increase consumers' willingness to purchase remanufactured products while contributing to production sustainability and resource efficiency (Song et al. 2018 [5]). However, the supply chain must balance between the warranty inputs and outputs to maximize benefits. This paper is primarily related to the research in three streams: the operation of the warranty strategy (which mainly focusing on the warranty period and the product life cycle), the supply chain pricing strategies and the consumer behavior theory. In the following, we review the literature in these three streams.At present, scholars have done preliminary research on the operation of warranty strategies, mainly focusing on the warranty period and the product life cycle. Li et al. (2016a) [6] studied the impact of the warranty period on the closed-loop supply chain system from the perspective of product warranty period. Lan et al. (2014) [7] explored the impact of product price and quality on the development of warranty strategies under the fuzzy supply chain based on three types of warranties. Du et al. (2016) [8] accurately estimated product warranty costs based on product endogenous variables (product loss rate, etc.) and gave cost calculation methods. Arabi et al. (2017) [9] determined the the best warranty period from the perspective of the manufacturer and consumer to minimize the total cost of use and increase the service life. Chen et al. (2017) [10] considered product warranty as an economic compensation for consumers in the event of product failure and compared the impact of the extended warranty provided by the manufacturer or distributor on the overall market. Li et al. (2016b) [11] discussed issues related to the manufacturer's pricing strategy in two supply chains, including one manufactur...

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