Decisions on dual-channel closed-loop supply chains with trade-old-for-remanufactured and trade-ins under carbon trading mechanism and subsidy

To advance the circular economy, policymakers are increasingly using tools such as carbon trading mechanisms and government subsidies. However, how these policies jointly affect firms’ strategies in such a competitive supply chain setting, a dual-channel closed-loop system featuring both trade-old-for-remanufactured and trade-in schemes, remains unclear. To this end, this study employs a Stackelberg game model to analyze how supply chain actors determine their pricing and recovery strategies when subject to both carbon trading and a dual-subsidy system. Our results reveal a clear divergence between two policy instruments. Dual subsidies consistently expand the market for remanufactured products and increase collected volumes, boosting profits for both firms and enhancing social welfare. In contrast, carbon trading mechanism, while also potentially increasing firm profits, tends to contract remanufacturing market and collection efforts. This research contributes by simultaneously modelling critical and interacting policies. It offers clear guidance for managers on navigating conflicting regulations and for policymakers on designing more effective policy combinations.