Cooperate or not? Strategic analysis of formal and informal recyclers under different retired power battery recycling market structures

Abstract

The huge economic value of retired power battery recycling market has attracted participations of informal recyclers with recycling channel advantage and formal recyclers with environmental responsibility. Meanwhile, consumers’ preferences for recycling prices and channels have resulted in different recycling market structures. However, considering the possibility of their complementary advantages, research on the cooperation strategies between them under different market structures currently lacks. To address this gap, this paper constructs a Hotelling model consisting of a formal and an informal recycler to describe the informal recycler’s recycling channel advantage and the formal recycler’s environmental responsibility and to depict the possible recycling market structures. Under different market structures, how informal recycler’s recycling channel advantage and the formal recycler’s environmental responsibility shape their optimal decisions, economic and environmental performances are explored. In addition, whether the two members should cooperate through a wholesale-pricing contract and the threshold conditions of cooperation if should are investigated from perspectives of recycling, economic and environmental performances. The results show that under the market structure with no competition, when environmental responsibility cost is small enough, cooperation can achieve a “triple-win” outcome of the two members’ profits and environmental performance. Under the market structure with partial competition, whether cooperation can achieve a “triple-win” situation additionally depends on the unit environmental impact of the informal recycler’s recycling. Higher unit environmental impact of the informal recycler’s recycling and lower formal recycler’s environmental responsibility cost can bring “triple-win” prospect. This paper can enrich the theory of dual-channel recycling management and guide formal recyclers to better cooperate with informal recyclers to achieve economic and environmental synergy improvement.