Manufacturer Choice of Selling Format in a Closed‐Loop Supply Chain

ABSTRACT This study builds stylized models to discuss the interaction between product recovery and online selling format in a closed‐loop supply chain, which comprises a manufacturer, online platforms, and customers. The manufacturer collects used products from customers, before choosing the product's selling format from the reseller only format, the marketplace only format, and both the reseller and marketplace formats. For each format, the optimal decisions (recovery rate, quantity, and price) are first obtained. Notably, we find that the marketplace format induces the manufacturer to improve the recovery rate. Furthermore, our results indicate that the manufacturer's choice of selling format depends on the saved cost of manufacturing a product using the collected products and the value fraction of customer preference for the marketplace relative to the reseller format. Specifically, if the value fraction is smaller but the saved cost is larger, using both the reseller and marketplace formats is preferred. And, we find that when the manufacturer changes from the reseller only format to both the reseller and marketplace formats, the selling price of the reseller platform decreases. Besides, we make some extensions to show the robustness of our assumptions and provide further guidelines for practitioners in the appendix.