Differential recycling strategies and government intervention in a closed-loop supply chain

Abstract

Previous literature has discussed recycling strategy and government intervention in a closed-loop supply chain; however, differential recycling strategies considering the bounded rationality of decision-makers are unexplored. This study establishes evolutionary game models with a two-dimensional dynamical system to analyze the long-term recycling behavior of enterprises in a supply chain, which consists of manufacturers and retailers. The evolutionarily stable strategy (ESS) of enterprises is derived, and the government intervention is investigated. The enterprises choose from two recycling strategies: (1) ordinary recycling strategy, i.e., only recycling high-quality waste electrical and electronic equipment (WEEE); (2) differentiated recycling strategy, i.e., recycling high- and low-quality WEEE. The results show that when the recycling difficulty of enterprises is at different thresholds, the system will evolve into a different ESS. Moreover, the government's intervention is effective. If government subsidies and penalties meet a certain range, the enterprises without recycling qualifications will choose the ordinary recycling strategy, while the enterprises with recycling qualifications will choose the differentiated recycling strategy. Finally, when enterprises make decisions on price and recycling rate, the recycling difficulty and consumer environmental awareness will affect the decisions and profits of enterprises. However, only government intervention can effectively affect the ESS.