Abstract
Focusing on the closed-loop supply chain (CLSC) comprising the manufacturer, retailer, and consumers in the waste products market, this study investigates how the government addresses the adverse selection problem on the hidden recovery costs of retailer and how it manages the moral hazard problem on the level of retailer’s hidden efforts. Based on incentive theory, a government incentive regulation aiming at maximizing social welfare is established in this study. In addition, a list of contracts with transfer payments is presented to elucidate the retailer’ collection efficiency and motivate the retailer to make the optimal investment. Besides, the impact of related factors on the recovery cost and social welfare level using numerical simulations is validated. Under government regulation, the retailer could maximize profit only by reporting the true recovery technology-type information to the government. Moreover, the retailer with high-recovery efficiency could obtain both retained profit and additional information rent. Finally, as the retailer made efforts to increase the recovery level, it increased investment cost, which affected the enthusiasm of enhancing the retailer’s recovery efficiency. Thus, the government should not blindly pursue the enhancement of recycling efficiency regardless of the cost, but should focus more on the control of recycling equipment and technology cost. Overall, this study facilitates scientific policy development and provides a reference for promoting CLSC operations.
Highlights
The rapid growth of information globalization and science and technology has inevitably harmed the human living environment
This paper applies incentive theory to consider a closed-loop supply chain (CLSC) composed of manufacturer, retailer, and consumers under government incentive regulation, and to study the problem of dual information asymmetry with both the recovery cost and effort are the private information of the retailer
By analyzing the role of the recycler with different recycling cost in the market, this paper provides a solution for the sustainable management of CLSC under dual-information asymmetry, and provides a theoretical basis for the government to encourage the recycler to improve recycling efforts and achieve the sustainable development of the environment
Summary
Due to the higher recovery cost, the companies can not improve the recovery efficiency At this time, the government participates in the enterprise recycling activities in various ways [10, 19, 27, 33, 36] applied the principal-agent theory to study the CLSC model with the information asymmetry and the government’s reward. This paper applies incentive theory to consider a CLSC composed of manufacturer, retailer, and consumers under government incentive regulation, and to study the problem of dual information asymmetry with both the recovery cost and effort are the private information of the retailer.
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