Impacts of altruistic preference and reward-penalty mechanism on decisions of E-commerce closed-loop supply chain

Abstract

This study considers two incentive mechanisms, the reward-penalty mechanism (RPM) and the altruistic preference (AP). An E-commerce closed-loop supply chain consisting of a remanufacturer and a network recycling platform (the platform) is constructed to examine the recycling service and the quality improvement. Three models are developed to study how RPM and AP affect recycling decisions and models are also extended to multiple recycling periods to explore how profits and recycling quantity change with time under two incentive mechanisms. The findings show that the RPM and AP help to improve recycling service level, quality improvement level, and recycling quantity. However, under the influence of the platform's AP, the RPM is not always conducive to raising the recycling price. The influence of the platform's AP on recycling price is affected by the quality improvement cost parameter. Only when the RPM intensity is higher than the threshold, RPM can benefit remanufacturer. Consumer surplus is higher with AP and RPM both considered, so consumers can benefit from the two incentive mechanisms. The social welfare first increases and then decreases with the RPM intensity, but increases with the AP coefficient if the reference point of the remanufacturer's profit is small. Although the AP causes a decrease in the platform's profit in the early period of recycling, it can increase recycling quantity and the remanufacturer's profit over time. Moreover, both the remanufacturer and the platform can benefit from two incentive mechanisms and eventually obtain higher profits over time.