Research on Pareto Improvement of Two-Stage Supply Chain Based on Return and Penalty Policy

This paper does research on order quantity and profits of members in cooperative and non-cooperative supply chains. First, the supply and demand model of members of non-cooperative supply chains is established, and optimization research on order quantity and price variables in this model has been carried out. Then the cooperation model in returnable cooperative supply chain is built by introducing return and penalty variables, and optimization strategy has been provided. Finally the analog simulation of both models is conducted. It turns out that larger order quantity and better maximum total profits can be achieved in cooperative supply chains compared with that in non-cooperative ones when prices are same. Cooperative model can accomplish Pareto improvement.