The role of returns policies in the supply chain of single-period products

To coordinate supply chains of single period goods, such as textbooks, CDs, and fashions, the manufacturer often commits to buy-back unsold goods in order to encourage retailers to stock and price items more aggressively. To examine this operational policy, the standard newsstand model is used to build a Stackelberg game between the manufacturer and the retailer. Then a numerical method is used to resolve the problem. An initial study conducted in this paper shows that the returns policies can obtain a win–win effect between the manufacturer and the retailer, and so effectively coordinate the performance of the supply chain system.