Take-back regulation policy on closed loop supply chains: Single or double targets?

Abstract

Many countries have imposed product take-back conditions on their manufacturers, as part of the commitment to the extended product responsibility. This paper explores the feasibility of the take-back regulation operating under a collection target and a reuse target. Two models using different regulation setups are developed to show the effects of a take-back regulation on consumer surplus, the benefits to the supply chain, and social welfare. The results suggest that the optimal strategies of the manufacturer depend on the regulation model applied. Setting higher regulation targets decreases the manufacturer’s profit, but the chain benefits from the reuse target. To achieve a high collection rate and reuse efficiency, policy makers should set a high collection target and a high reuse target. To improve the social welfare, a low collection target and a high reuse target should be set. This study provides some suggestions for the manufacturer to cope with regulation targets and offers some guidelines for policy makers to set and implement the regulation targets.