Research on the variable buyback contract

Abstract

Purpose

Based on the traditional buyback model, this paper aims to propose a new buyback method – the variable buyback contract – to solve the serious inventory backlog in the current economic situation.

Design/methodology/approach

In this paper, the authors further study the buyback problem in a two-level supply chain with uncertain demand. Such a problem can be found in many research papers, which also use the Stackelberg game model. They put forward many factors that affect the buyback price, including risk preference, random arrival of consumers, etc. Different from the existing research, the authors propose another factor that may affect supply chain buyback – the retailer's remaining inventory to study the buyback contract.

Findings

First, the authors found that under the variable buyback contract, there is an optimal retail price, wholesale price and an optimal range of parameter settings for the buyback price. Second, the proposed Pareto-optimal solution for system improvement can achieve supply chain coordination. Third, under some conditions, the variable buyback contract is better than the wholesale price contract and fixed-price buyback contract.

Originality/value

First, this is the first paper to discuss to measure the buyback price with the retailer's remaining inventory. Second, the proposed buyback contract can help decision-makers to choose the optimal improvement strategies. Third, this contract has a certain practical significance, which can effectively alleviate the current inventory backlog problem.

Citation

Liu, T., Liu, W. and Yang, F. (2021), "Research on the variable buyback contract", Journal of Modelling in Management, Vol. 16 No. 1, pp. 145-171. https://doi.org/10.1108/JM2-11-2019-0268