Study of Formalization of Informal Collectors Under a Dual-Channel Reverse Logistics: A Game Theoretic Approach

Abstract

Proper and appropriate collection and recycling of Waste electrical and electronic equipment (WEEE) are necessary regarding their value and harmfulness. However, the formal collection channel and appropriate recycling of WEEE are still in their infancy in most developing countries. In contrast, informal collection and recycling activities play a big role in end-of-life treatment of WEEE. Informal recycling activities are always associated with environmental pollution, poor working and living conditions for informal recyclers, while informal collection activities are regarded as helpful and beneficial to waste collection as well as jobs opportunity for the low-income population. Considering these, this study is conducted to analyze the possibility of incorporating informal collectors into formal channel and to provide efficient countermeasures for a better formalization extent. Based on game theory, a dual-channel collection and recycling model is established, in which the formal and informal recycling activities are divided. In this dual-channel model, the informal collector has two choices, either sending WEEE to the formal recycler or to the informal recycler. The authors also introduce the bargaining power of the informal recycler in the model. Considering the formal recycler as the Stackelberg leader, the optimal solutions of the dual-channel model are solved. The results indicate that under a certain condition a higher formalization extent can be achieved as the decreased bargaining power of informal collectors and the decreased additional cost of formal recycling. Accordingly, several countermeasures are proposed to promote the formalization of informal collectors.