Design investment and advertising decisions in direct-sales closed-loop supply chains

This study analyzes decision making regarding a direct-sales closed-loop supply chain that consists of an original equipment manufacturer (OEM), a remanufacturer and two advertising agents. A two-stage no cooperative game is established: the OEM determines the design investment and advertising price of new product, the remanufacturer decides the advertising price of a remanufactured product in the first stage at the same time, and the two advertising agents determine advertising level. This paper solves the game strategies backward and then analyzes the impacts of the parameters of design and advertising on equilibrium decisions and the profits of closed-loop supply chain members. The results show that (1) unit advertising cost and design cost decrease in equilibrium advertising price, design investment and advertising level, but there is a positive correlation between advertising elasticity of demand and equilibrium decisions; (2) the design investment parameter of cost-savings is positively related to the equilibrium design investment level, advertising price and advertising decisions; and (3) if the OEM's investment budget is too small, the equilibrium results cannot be obtained. In this case, to pursue maximum profit, the OEM need to allocate capital to achieve a balance between design and advertising investment. This study can support the decision making of direct-sales closed-loop supply chain enterprises. (C) 2019 Elsevier Ltd. All rights reserved.