This research proposes a dynamic decision-making framework for a hybrid production system that incorporates manufacturing and remanufacturing procedures into a closed-loop supply chain network with merchandise substitution and shortages within traditional markets (TM) and electronic markets (EM). In particular, we develop models of profit maximization and equilibrium analysis by using calculus with dynamic programming under four business schemes, including a manufacturing-only model within TM/EM and a hybrid remanufacturing model within TM/EM. Dynamic decision-making planning was taken for brand-new and like-new decayed merchandise in hybrid production systems. The results demonstrate that solutions generated within EMs surpass those within TMs in terms of maximizing profits. Further, the hybrid remanufacturing model did not surpass the manufacturing-only model under a general setting, but had better performance under certain conditions, including intense competition, a smaller remanufacturing cost, a larger brand-new merchandise market size, and a smaller like-new merchandise market size.