Reward–penalty mechanism for closed-loop supply chains under responsibility-sharing and different power structures

Abstract

We study responsibility sharing in waste electrical and electronic equipment (WEEE) collection between the manufacturer and the collector, and identify a reward–penalty mechanism (RPM) for government to motivate industry’s recycling endeavor. We develop several RPMs for different closed-loop supply chains (CLSCs) under various channel power structures, including the manufacturer-led and the collector-led closed-loop supply chains, and those with and without government RPM. We find that increasing the reward–penalty intensity can improve the WEEE collection and lower product price. From the collection rate improvement perspective, the collector-led is a better channel structure of CLSC compared with centralized and manufacturer-led channel structure. Social welfare increases when both reward–penalty intensity and the CLSC leader’s responsibility ratio are high. The government’s RPM should satisfy two conditions: (i) under high reward–penalty intensity, more responsibility should be assigned to the CLSC leader; (ii) if the CLSC is collector-led, her responsibility ratio must be higher than 1/3 in order to enhance the collection rate. Similarly, the ratio of responsibility in the manufacturer-led case must be greater than 2/3 to improve the collection rate.