Managing a closed-loop supply chain with take-back legislation and consumer preference for green design

Abstract

In the context of the take-back legislation and the consumer preference for green product design, we construct a single-period stylized model of the manufacturer with the goal of profit maximization. The manufacturer’s optimal green product design, production, and recycling strategies are determined under the requirement of the mandated targets (including collection and recycling rates). We especially emphasize the impacts of the mandated targets and the consumer preference for green product design on the manufacturer’s optimal strategies and profit. We find that the manufacturer’s optimal strategies are affected by the potential recycling benefit of the cores. Stricter mandated recycling rate always causes a decline in the profit. However, stringent mandated collection target does not always have a negative impact on the profit and the change of its impact closely depends on the sum of the collection and the disposal cost of the manufacturer. In addition, higher consumer preference for green product design always brings an increase in the profit. From the perspective of motivating product design, the mandated targets and the consumer preference for green product design can motivate the manufacturer to implement the green product design. Finally, we investigate the environmental implications of the mandated targets and the consumer preference for green product design. Stricter mandated targets and the increasing consumer preference for green product design may bring undesirable outcomes. Based on the above conclusions, key policy implications can be generated that the government should set appropriate mandated collection and recycling targets in accordance with the characteristics of product recovery instead of pursuing too high targets, otherwise it neither improves environmental performance nor encourages green product design. Besides, when products are environmental-friendly enough, consumers should avoid excessive pursuit of green product design, otherwise they hurt the environment. Finally, the manufacturer cannot be incentivized to implement green product design with too low or too high maximum potential recycling benefit with the green product design.