Managing manufacturer encroachment and product conflicts in a closed-loop supply chain: The case of information asymmetry

Abstract

The implementation of direct channels allows manufacturers to distribute new and remanufactured products through separate channels. This prompts manufacturers to carefully consider which products to channel directly. In the remanufacturing process, manufacturers often delegate the collection process to retailers. However, only retailers know their own collection efficiency information, whereas manufacturers can only know its probability distribution. To explore the choice of encroachment channel strategy under information asymmetry, we constructed a dual-channel closed-loop supply chain model, in which the manufacturer can design non-linear contracts to incentivize the retailer to choose contracts that align with its capabilities, ultimately maximizing its profit. We discuss the case of manufacturer dual product encroachment and the impact of consumer channel preferences in the extended model. The findings reveal that, contrary to previous studies, the profits of low-type manufacturers are not always reduced, and the effect of information asymmetry may be opposite. Moreover, information asymmetry can be detrimental to high-type retailers. The optimal channel choice is affected by factors such as remanufacturing cost, consumer channel preference, information asymmetry, and reserved profit differences. Manufacturers and retailers can achieve a win-win situation through new product encroachment, which can also counteract the negative effects of information asymmetry and enhance consumer surplus.