Optimal pricing and environmental improvement for a hazardous waste disposal supply chain with emission penalties

Abstract

Hazardous waste management has become a municipal problem, associated with industrial development and changing consumption patterns. We study the hazardous waste management system as a supply chain with a disposal facility and a contractor, which serves customers with demand sensitive to price and environment impact. The government intervenes with this supply chain by imposing emission penalties that make the waste disposal facility responsible for reducing disposal process emissions. The Stackelberg game and Nash equilibrium are used to model the decision-making sequence between the disposal facility and the contractor. We specify different scenarios to model the hazardous waste management supply chain. The goal of this research is to find the optimal disposal service price and level of environmental improvement to mitigate adverse impacts and maximize profits. The applicability of dual-channel service in the hazardous waste supply chain is also investigated. Our study shows that the supply chain obtains the highest profit if both the disposal facility and the contractor operate in a centralized model. Under some scenarios, profitability improves if the disposal facility becomes active in waste collection and transportation under a dual-channel supply-chain model. Demand sensitivity to price and environmental impacts can affect the adopted level of improvement by disposal facilities.