Game Theory Application for Circular Economy Model in Furniture Industry
Purnawan Adi Wicaksono (a*), Sri Hartini (a), Sutrisno (b), Tsamara Yumna Nabila(a)
a) Industrial Engineering Department, Diponegoro University, Jl Prof Soedarto, SH, Semarang 50275, Indonesia
*purnawan[at]ft.undip.ac.id
b) Mathematics Department, Diponegoro University, Jl Prof Soedarto, SH, Semarang 50275, Indonesia
Abstract
This research proposes a business model for furniture industry to address circular economy concept. Circular economy aims to keep the resources in use for as long as possible, and recover the product and material at the end of its life cycle. Game theory is used in this research. The conceptual model proposes rent option so end users are possible to use the furniture in desired time period. Using rent option, the product could be taken back from the end user and could be sold or rent it again to another user. The concept of game theory is to formulate and suspect the situations of interaction between players involved, and also decisions taken. Therefore, game theory is used to determine optimal strategy among players. Player strategies are taken when it has reached the Nash Equilibrium. The propose model consists of 4 parties such as the furniture industry, remanufacturer, distributor, and end user. Payoff is determined for every player to observe each players- profit in addressing CE. Based on the result, there is 1 strategy that reached the Nash equilibrium. We also picked out 3 of 162 possible strategies that give the best advantages for all players. Each strategies contain players- prices decision, and for end user decision is the length of rent.
Keywords: Circular Economy, Game Theory, Nash Equilibrium, Furniture Industry
Topic: Sustainable Development