How points-exchange incentives in a closed-loop supply chain weaken competition from the informal recycler

Abstract

<p style='text-indent:20px;'>To reduce the negative impact of informal recycling on the environment, we consider the competition in the recycling industry to explore the manufacturer's collection channel choice and the optimal points-exchange level. In this paper, a closed-loop supply chain model including a manufacturer and an informal recycler (IR) is constructed. Stackelberg game theory is used as a theoretical guide. In addition, we study the optimal decision problem under the profit maximization model. We find that the points-exchange offer increases the sales of new products and alleviates competition from IR. The manufacturer prefers to personally implement points-exchange activities to directly collect used products from consumers when the disposal revenue of IR is low. The manufacturer's exchange strategy forces IR to increase the acquisition price and face large cost pressure, which significantly reduces the collection quantity of IR. In the coordination problem, the revenue-sharing contract allows both the manufacturer and the third party to be in a win-win situation. We focus on the effectiveness of points-exchange incentives for manufacturers and third parties. Future research could explore the diversity of exchange offers by including government agencies in the closed-loop supply chain.</p>