Abstract: This paper studies the impact of government's premium and penalty mechanism on the cooperation strategies of the manufacturer in closed-loop supply chain (CLSC). We construct four cooperative models based on game theory:no cooperation mode (model N), cooperation only with the recycler (model MC), cooperation only with the retailer (model MR), and cooperation with both the retailer and the recycler (model MCR).The results show that the manufacturer has both incentives for cooperation with the retailer and incentives for cooperation with the recycler. Under different cooperation strategies, the supply chain has the highest profit when the manufacturer cooperates with the retailer and the recycler, and the total profit of supply chain is lowest when the three have no cooperation with each other. However, whether the supply chain profit under the manufacturer-retailer partnership is higher than that under the manufacturer-recycler partnership is associated with the potency dimension of government's rewards and punishments and the recycling efficiency of old products. If the government's rewards and punishments are small, the supply chain has the higher profit when the manufacturer only cooperates with the retailer; If the government rewards and punishments are large, the supply chain has the higher profit under the manufacturer-retailer partnership than under the manufacturer-recycler partnership when the recycling efficiency is low, but the supply chain has the higher profit under the manufacturer-recycler partnership than under the manufacturer-retailer partnership when the recycling efficiency is high. Besides, the manufacturer choosing to partner with the retailer or the recycler can always increase consumer surplus and social welfare.

Key words: premium and penalty mechanism, closed-loop supply chain, cooperation strategies, recycling efficiency