Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior

Accepted Manuscript

Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior Feng Lipan , Kannan Govindan , Li Chunfa PII: DOI: Reference:

S0377-2217(17)30005-X 10.1016/j.ejor.2016.12.050 EOR 14181

To appear in:

European Journal of Operational Research

Received date: Revised date: Accepted date:

4 May 2015 25 October 2016 31 December 2016

Please cite this article as: Feng Lipan , Kannan Govindan , Li Chunfa , Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior, European Journal of Operational Research (2017), doi: 10.1016/j.ejor.2016.12.050

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Highlights 

Proposed a dual-recycling mode for a two-echelon reverse supply chain

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Investigated collecting competition between the recyclable dealer and recycler considering consumer behavior Incorporated the consumer preference into the customer collection channel choice model

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Examined the optimal recycling channel configuration of the recyclable dealer

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ACCEPTED MANUSCRIPT Strategic planning: Design and coordination for dual-recycling channel reverse supply chain considering consumer behavior Feng Lipanb,c

Li Chunfac

Centre for Engineering Operations Management, Department of Technology and Innovation, University of Southern Denmark, Odense, Denmark b Business School, Nankai University, Tianjin 300071, China c School of Management, Tianjin University of Technology, Tianjin 300384, China

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a

Kannan Govindana1

Abstract:

In this paper, we consider a two-echelon reverse supply chain with dual-recycling channels where the recyclable dealer acts as a Stackelberg game leader and the recycler acts as a follower.

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Due to the price competition between these two channels, the dominant dealer always faces a challenge on how to strategically design the reverse channel structure. By introducing consumer preference for the online recycling channel into the model, we examine the challenge in three scenarios: single traditional recycling channel, single online-recycling channel, and a hybrid dual-recycling channel with both centralized and decentralized cases. We investigate two

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problems that are comprised of designing and coordinating a reverse supply chain with a traditional and an online recycling channel. The results show that the dual-recycling channel

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always outperforms its single channel counterparts from the recyclable dealer’s and system’s perspectives. In the coordination problem, a contract with transfer and online recycling prices

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can coordinate the dual-recycling channel reverse supply chain but harms the dealer. Therefore, we propose two complementary contracts – a two-part tariff contract and a profit sharing

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contract – which succeed in coordinating the reverse supply chain system and create a win-win situation. Finally, numerical examples illustrate the model, and results show that the consumer preference for online recycling affects the acceptance of the above contracts for the recyclable

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dealer.

Keywords: Supply Chain Management; Stackelberg game theory; online recycling channel; consumer behaviors; dual recycling channel

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Corresponding author, Email: [email protected] (Kannan Govindan); Phone: +45-65503188; Fax: +45-65503237 2

ACCEPTED MANUSCRIPT 1 Introduction The rapid development of information technology and social economy promoted the upgrading of electrical and electronic equipment (EEE) resulting in a huge amount of waste electrical and electronic equipment (WEEE) simultaneously (Yu et al., 2010; Wang et al., 2011). If WEEEs cannot be collected and disposed of, the economic salvage value cannot be obtained and the environment is harmed. To realize WEEEs’ economic value and correspondingly to

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reduce its environmental harm, relevant legislations for WEEEs’ implementation and an improvement in consumers’ environment protection consciousness have emerged as significant practices.

Many enterprises, such as HP, IBM, Apple, and Kodak started recycling and

disposing WEEEs themselves or outsourced such tasks to a third party (Govindan et al., 2014; De Giovanni et al., 2016; Choi et al., 2013). But due to the inconvenience of recycling,

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consumers retain or abandon a great deal of WEEEs instead of recycling them; their reluctance to act means recyclable dealers are forced to wait (Wang et al., 2011; Yin et al., 2014; Huang et al., 2006). Hence, an unaddressed question in literature is how to validly and quickly collect WEEEs through strategic planning, including how to properly design available recycling channels.

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A promising answer to the above challenge could be by utilizing an online recycling channel. Such online recycling channels started gaining importance when recyclable dealers

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were made available. Recyclable dealers, such as Changhong Green Group Company Limited and Shanghai Xin Jinqiao Environmental Protection Company Limited, who earlier collected

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WEEEs through the traditional recycling channel, now began to collect e-wastes through online recycling channels2. This service helped consumers deal with WEEEs more conveniently by

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relaxing the constraint of traditional recycling due to physical distance and space. It also helped recyclable dealers obtain appropriate WEEEs accurately and it reduced costs of collection and transportation. But online recycling and, more specifically, managing a dual-recycling channel

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strategy has its own challenges, including competing with one’s own traditional recycling channels which may result in cannibalization. The recyclable dealer, who already owns a traditional recycling channel and who plans to

adopt online recycling, is inevitably influenced by various factors like consumers’ preference of method and pricing competition between the different recycling channels. The recyclable dealer’s first decision is whether or not adopting a dual-recycling channel strategy will strengthen his competitive advantage and increase his profit. A model for coordinating a dual2

Detailed information is provided by http://www.gerunzs.com/; http://www.gome.com.cn/;. http://www.xjqhb.com/en/

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ACCEPTED MANUSCRIPT recycling channel to avoid severe competition is essential. This paper is inspired by the impact of the extensive popularity of online recycling for e-waste in China. Because major recyclable dealers offer both traditional and online methods in China to consumers, these companies are willing to improve the unit price of collection to attract more customers to choose an online recycling channel (refer to www.aihuishou.com). Although many studies have explored the pricing, inventory and coordination of the forward supply chain consisting of traditional marketing and direct marketing channels (Chiang

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et al., 2003, Hua et al., 2010, Xu et al., 2012, Xu et al., 2014), there is limited analysis that focuses on dual-recycling channels, especially those that consider both traditional and online recycling channels (Savaskan et al., 2006; Huang et al., 2013; Hong et al., 2014). To fill this gap, we aim to investigate the recyclable dealer’s optimal strategic planning, i.e., reverse channel choice and coordination of dual-recycling reverse supply chain. The main contributions of this

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research are summarized as follows:

First, we incorporate consumer preference into the recycling channel choice model, because price and utility are primary factors for the return of WEEE.

Second, we further examine the recycling channel configuration for the recyclable dealer,

reverse supply chain system.

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and we investigate how consumer preference affects the dealer’s strategy, his profit, and the

Third, we propose appropriate contracts (i.e. two-part tariff contract, profit sharing contract

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and revenue sharing contract) to coordinate the reverse supply chain with a hybrid collection channel, and we find that consumer preference for the recycling channel plays an important role

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in the acceptance of such contracts.

The remainder of the paper is organized as follows. Section 2 discusses the related literature.

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Section 3 presents analytical models and section 4 analyzes the recycling channel configuration strategy. Sensitivity analysis is provided in section 5. In section 6, we further analyze the

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coordination of a reverse supply chain with a hybrid recycling channel and verify these conclusions by numerical examples in section 7. Section 8 summarizes key results and provides future research directions.

2 Literature review This paper investigates the dual-recycling channel reverse supply chain that consists of traditional recycling and online recycling channels; further, we construct a detailed consumer recycling channel choice model to determine the recyclable dealer’s optimal operational 4

ACCEPTED MANUSCRIPT decisions. Related literature considers three issues: channel management, channel competition, and reverse supply chain coordination. A review of the relevant and latest studies is provided that correlate these areas as follows. Channel management is an important topic in reverse supply chain management, and many researchers studied the recycling channel choice strategy of the recyclable dealer/manufacturers in a reverse supply chain (Savaskan et al., 2004; Atasu et al., 2013; Huang et al., 2013). Savaskan et al. (2004) investigated three kinds of channel structures of a two-tier supply chain

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and showed that outsourcing to a retailer to collect used products is better than others by comparing optimal profit for the manufacturer in the above three environments. Atasu et al. (2013) further extended the work of Savaskan et al. (2004) to different collection cost structures and found that the optimal reverse channel choice is driven by how the cost structure moderates the manufacturer’s ability to shape a retailer’s sales and collective quantity decisions. Chuang et

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al. (2014) examines the manufacturer’s choice of three alternative reverse channel structures where the collection cost structure exhibits either economies of scale or diseconomies of scale; they further explore the impact of the take-back laws at the behest of the manufacturer. By developing three different cases, i.e. the non-cooperative system, the channel-cooperative system,

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and the global-cooperative system, Jena et al. (2014) study the price competition and cooperation issues in a duopoly closed-loop supply chain and find that the last is the best among the three cases. Huang et al. (2013) studied the channel configuration strategy of manufacturers and felt

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that it existed in a domain of the competing intensity parameter where dual-recycling channel strategy always outperforms a single recycling channel strategy, both from the perspectives of

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consumers and manufacturers. Liu et al. (2016) explore the optimal acquisition prices and government subsidies in a dual channel environment comprising both formal and informal

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sectors. Some papers investigate a multi-echelon closed-loop supply chain or reverse supply chain on different reverse models and coordination mechanisms (Ma et al., 2016, Xiong et al.,

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2016, and Govindan et al., 2014). Xiong and Yan (2016) analyze the impact of channel structure on selling remanufactured goods; they find the strategy of selling remanufactured goods through a manufacturer-owned e-channel dominates that of remanufactured sales through a third party. In addition, some researchers examined the impact of factors such as channel leadership (Choi et al., 2013), product take-back legislation (Atasu and Wassenhove, 2012), government subsidies (Hong et al., 2014 and Liu et al., 2016), and product quality (Örsdemir et al., 2014 and Cai et al., 2014), on the performance of a closed-loop supply chain and the manufacturer’s reverse channel choice. Please refer to Govindan et al. (2015) and Souza et al. (2013) for more details about closed-loop supply chain and reverse logistics. 5

ACCEPTED MANUSCRIPT The above literature provide approaches and theories to study the channel choice of a reverse supply chain, but they are limited to single/dual-recycling channel structures under the traditional recycling models, and they neglect the co-existence of a traditional and an online recycling channel. In contrast to the above studies, we aim to explore the optimal pricing and recycling channel choice under a reverse supply chain environment including traditional recycling and online recycling channels. Except for the above issues, coordinating a reverse supply chain is a popular and fruitful

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field for further exploration. In a similar field, Savaskan and Wassenhove (2006) addressed optimal pricing and reverse channel choice in a closed loop supply chain with competing retailers. Atasu and Subramanian (2012) considered the effect of the extended producer responsibility on manufacturer collection and consumer surplus with product competition. Örsdemir et al. (2014) examined the problem of manufacturer production and remanufacturing

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with competitive quality from perspectives of the manufacturer, consumers, and the environment, and finally concluded that the manufacturer can rely on quality and limiting quantity of cores as a strategic lever to compete with the remanufacturer. Hong et al. (2013) explored three kinds of hybrid dual-recycling channel structures in a closed-loop supply chain, and they provided some

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managerial insights that the most effective reverse channel structure for the manufacturer is the manufacturer and the retailer hybrid collection channel. The most relevant papers are those of Huang et al. (2013) and Hong et al. (2013), which focus on analyzing the strategy of dual

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recycling channel design and find that the reverse channel structure choice depends on the competing intensity. Jena et al. (2014) explore how to coordinate a duopoly closed-loop supply

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chain where two manufacturers are responsible for collecting used products. Some works pursue the coordination of a reverse supply chain with marketing strategies and government subsidies

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(Zhang and Zhang, 2016). Unlike these previous works, our paper considers a reverse supply chain with the hybrid recycling channel and includes a traditional recycling channel and an

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online recycling channel. The competition between them is shaped by the unit collection price of every recycling channel in our paper, whereas it is characterized by the investment in used product collection in Huang et al. (2013) and Hong et al. (2013). Moreover, we investigate the mechanism to coordinate the supply chain with the dual-recycling channel, and the result shows that the recyclable dealer can coordinate the dual-recycling channel reverse supply chain through some agreements. By offering some feasible contracts, all participants’ objectives are in line with the objective of the supply chain with an optimal supply chain performance being achieved as well (Cachon, 2003). To a great extent, the contracts used to coordinate the forward supply chain can also be 6

ACCEPTED MANUSCRIPT applied to coordinate the reverse supply chain (Govindan et al., 2014, Zeng, 2013; Ferguson et al., 2006). Govindan (2014), Zeng (2013), and Ferguson et al. (2006) found that the revenue sharing contract could be applied to coordinate the reverse supply chain, e.g., Govindan et al. (2014) proved that this contract succeeded in coordinating the two/three tier reverse supply chain through a case for the personal computer industry, and Zeng (2013) verified that parties in the supply chain benefit from a revenue sharing contract after describing the product return process and presenting a consumer segmentation model. These works offer a feasible approach to

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coordinate the reverse supply chain with a single recycling channel, but they present a limited analysis on how to coordinate the reverse supply chain with a dual recycling channel.

As we know, to coordinate a multi-channel supply chain, we can use a combination of some contracts, like the wholesale price contract, profit sharing contract, and two-part tariff contract (Chen et al., 2012; Cao et al., 2013; Xu et al., 2014; Cai, 2010). Indeed, based on these works,

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we prove both the revenue sharing contract and combination contracts (such as a collection price contract with a two-part tariff contract or a profit sharing contract) succeed in coordinating a reverse supply chain with a dual-recycling channel. Further we investigate the effect of consumer preference for online recycling channels on the contracts.

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The main objective of this paper is to address the following questions: 1) Should the recyclable dealer open a new recycling channel when he already possesses one? Given that consumer preference for the online recycling channel as well as the expectations

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of marginal profit, how should the recyclable dealer maximize profit by a single/dual recycling channel strategy?

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2) As a profit-maximizing party, when should the recyclable dealer adopt a dual recycling channel strategy or a single recycling channel? Given the dual-recycling channel, how should the

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recyclable dealer coordinate the reverse supply chain to avoid conflict between traditional recycling and online recycling channels? From the point of social efficiency regarding the

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collection of used products, which reverse channel model is the best? 3) How does consumer preference for the online recycling channel affect recyclable dealer’s

optimal pricing and recycling channel configuration strategy? How does this parameter influence the recyclable dealer’s choice of coordination contracts? 3 Analytical models 3.1 Problem description and Basic assumptions 3.1.2 Problem description 7

ACCEPTED MANUSCRIPT To examine the strategic planning of the recyclable dealer, we explore a reverse supply chain problem where a dominated recyclable dealer decides to set up an online recycling channel model. To illustrate, when should the recyclable dealer adopt a dual-recycling channel strategy compared to a single recycling channel? We start with the benchmark model: two single recycling channel models where the recyclable dealer collects used products through a traditional recycling channel or an online recycling channel. Next, we investigate the recyclable dealer’s optimal price and collection decisions under a decentralized case. In addition, a centralized case

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which serves as a benchmark model is analyzed in the following sections to explore the coordination problem in the reverse supply chain having a dual-recycling channel (see Fig. 1). Recyclable Dealer

Recyclable Dealer

Recyclable Dealer

Recyclable Dealer

bt

bt

Recycler

pd

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Recycler

pt

pt Consumers

pd

(b) single online-recycling channel

Consumers

(c) Centralized case for dual-recycling channel

Online recycling channel

pd

pt

Consumers

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(a) single traditionalrecycling channel

Consumers

Recycler

(d) Decentralized case for dual-recycling channel Traditional recycling channel

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Fig. 1 Four kinds of reverse supply chain models 3.1.2 Basic assumption

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We examine a dual-recycling channel reverse supply chain problem where a Stackelberg recyclable dealer collects used products from a recycler at a certain price and also collects them

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through an online recycling channel. Firstly, we give the notations and relevant parameters, as shown in Table 1, which are used widely in the following sections.

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Table 1 Notations

Parameter

Definition

𝑝𝑡

Recycling price of obsolete products in the traditional recycling channel

𝑝𝑑

Recycling price of obsolete products in an online recycling channel

𝜃 𝑤 𝑠 𝑐0

Acceptance of online recycling channel Expected revenue for dealing with one unit of an used product Consumer willingness to return one unit of a used product Collection cost for one unit of product in the traditional recycling channel at recycler

𝑐𝑟𝑖

Inspection cost at recycler

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ACCEPTED MANUSCRIPT 𝑐𝑟ℎ

Handling cost at recycler

𝑐𝑟𝑠

Shipping cost from recycler to recyclable dealer (including storage cost)

𝑐𝑝𝑖

Inspection cost at recyclable dealer

𝑐𝑝𝑑

Per unit disposal cost for one unit of used product at recyclable dealer

𝑐𝑝𝑠

Shipping cost from consumer to recyclable dealer

𝑏𝑡

Transferring price from recycler to recyclable dealer

𝑄𝑗

Recycling quantity functions for traditional recycling channel and online recycling channel, subscript j takes values of t and d, respectively. Profit function for channel party i in the mode k. Superscript k takes the values of C, D, respectively denoting model C and D. and subscript i takes values of R and RD, denoting recycler and the recyclable dealer, respectively.

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𝛱𝑖𝑘

We consider a recyclable dealer who plans to construct offline and online recycling channels, i.e., traditional recycling and online recycling channels, where consumers can return used products

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to the recyclable dealer through these recycling channels. At the same time, the recyclable dealer gets profit by recycling and disposing the returned used products. To achieve the primary goal, we make the following modeling assumptions.

(1) The consumer who is willing to return one unit of used product if and only if the recycling price 𝑝𝑡 or 𝑝𝑑 is greater than the consumer return willingness, where 𝑠 is uniformly distributed

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within the consumer population from 0 to 1, with a density of 1.

(2) The consumer’s preference for recycling channels is different, and whether a consumer

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selects traditional recycling channel or online recycling depends on consumer utility, which equals the difference between recycling price 𝑝𝑡 or 𝑝𝑑 and consumer return willingness 𝑠. (3) The total cost to collect one unit of used product through online recycling channels is less

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than the traditional recycling channel, i.e., 𝑐𝑝𝑖 + 𝑐𝑝𝑠 < 𝑐0 + 𝑐𝑟𝑖 + 𝑐𝑟𝑠 + 𝑐𝑟ℎ .

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(4) The collective quantity of WEEE in one recycling channel increases with the recycling price of itself, while decreasing with the recycling price of the other recycling channel. This factor is expressed as ∂ 𝑄𝑑 ⁄𝜕𝑝𝑑 > 0 (∂ 𝑄𝑡 ⁄𝜕𝑝𝑡 > 0) and ∂ 𝑄𝑑 ⁄𝜕𝑝𝑡 < 0 (∂ 𝑄𝑡 ⁄𝜕𝑝𝑑 < 0).

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The above assumption states that a consumer returns used products to the recyclable dealer,

when recycling price for one unit of used product is bigger than the consumer return willingness, otherwise, he/she does not return it (Hammond et al., 2007; Qiang et al., 2013). So the recyclable dealer or recycler needs to pay a price for one unit of used product, which must be higher than the consumer’s return willingness, otherwise the collective quantity will be equal to zero. Suppose consumers are heterogeneous in their preference for the online recycling channel, but the acquisition from the internet for a consumer is different. This is similar to the assumption in the works of the forward dual channel supply chain (Chiang et al., 2003; Xu et al., 2012). 9

ACCEPTED MANUSCRIPT But what is different from the works of Chiang et al. (2003) and Xu et al. (2012), in our paper, is that the consumer preference for the online recycling channel is denoted by 𝜃, which satisfies 𝜃 > 1 3. The smaller the value of 𝜃, the higher the consumer preference for the online recycling channel; in other words, the greater the consumer preference for the online recycling channel, the lower is the recycling price that the recyclable dealer or the recycler needs to pay. As proved in many studies, the price for used products via online markets is always higher than those sold through traditional markets (Lee, 1998). The consumer’s return willingness of a used product

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collected via traditional recycling channel is 𝑠 and it is 𝜃𝑠 when collected by an online recycling channel.

In addition, because the recyclable dealer saves the cost of searching, waiting and logistics and has advantages in inspection, disposing and transferring during the collection process, so the cost to collect one unit of used product through online recycling channels is less than that for the traditional

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recycling channel. Let 𝛥 = 𝑐0 + 𝑐𝑟𝑖 + 𝑐𝑟𝑠 + 𝑐𝑟ℎ and 𝛤 = 𝑐𝑝𝑖 + 𝑐𝑝𝑠 , then we have 𝛥> 𝛤. 3.2 Functions of collection quantity

In daily life, the recycler always pays a price 𝑝𝑡 for a unit of obsolete product to consumers; thus, the net consumer surplus with consumer return willingness 𝑠 is obtained as 𝑝𝑡 − 𝑠 by

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returning the obsolete product. All consumers will be willing to return the used product if and only if 𝑝𝑡 − 𝑠 > 0. Specifically, there is no difference between returning the used product and not

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returning it if the consumer return willingness equals 𝑝𝑡 . Consumers will be willing to return their used product when the return willingness valuation belongs to [0, 𝑝𝑡 ]. For analytic simplicity, we

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suppose that the number of consumers in the market is 1. So the recycling quantity of obsolete products under the traditional recycling channel denoted by 𝑄𝑡 , can be formulated as 𝑄𝑡 = 𝑝

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𝑡 ∫0 𝑑𝑠 = 𝑝𝑡 , where 0 ≤ 𝑝𝑡 ≤ 1.

Similarly, if obsolete products are recycled through an online recycling channel at a price 𝑝𝑑 ,

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then net consumer surplus in this scenario is 𝑝𝑑 − 𝜃𝑠. Consumers are willing to return used products via an online recycling channel when the valuation 𝑝𝑑 − 𝜃𝑠 > 0, i.e., when the consumer with reservation value 𝑠 satisfies 𝑝𝑑 ⁄𝜃 > 𝑠 products will be returned to the online recycling channel. At the same time, we derive that the recycling quantity for the obsolete products through 𝑝 ⁄𝜃

an online recycling channel as 𝑄𝑑 = ∫0 𝑑

𝑑𝑠 = 𝑝𝑑 ⁄𝜃 , where 0 ≤ 𝑝𝑑 ≤ 1.

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If 𝜃 < 1 (all consumers prefer the online recycling channel rather than the traditional recycling channel) and 𝑤 − 𝛥 − 𝑐𝑝𝑑 < 𝑤 − 𝛤 − 𝑐𝑝𝑑 (because the recyclable dealer can save the cost of searching, timing and logistic through online recycling channel), then the traditional recycling channel will be given up. In this case, online recycling dominates traditional recycling both by making the consumer utility higher and more profitable. Therefore, the recyclable dealer would want to switch to a single recycling channel, and drop the traditional recycling channel. In this paper, we focus on dual-recycling channels, and to keep the traditional recycling channel viable, we mainly pay attention to the case, where 𝜃 > 1.

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ACCEPTED MANUSCRIPT With two return options through which consumers may return obsolete products, their decisions revolve around comparison of the net consumer surplus derived from traditional and online recycling channels is: 𝑝𝑡 − 𝑠 versus 𝑝𝑑 − 𝜃𝑠. Hence, we get the consumer’s utility as 𝑈𝑡 (𝑠) = 𝑝𝑡 − 𝑠 (traditional recycling channel) and 𝑈𝑑 (𝑠) = 𝑝𝑑 − 𝜃𝑠 (online recycling channel) when the reservation value is 𝑠 . From the consumer’s utility maximization principle, we characterize recycling quantity functions in both traditional and online recycling channels as

𝑄𝑡 = {

𝑝𝑑 −𝑝𝑡

𝑝𝑡 −

𝜃−1

0,

𝜃−1

𝑝𝑑 𝜃

𝑝𝑑 𝜃

𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒

𝑝𝑑 −𝑝𝑡

𝑄𝑑 = {

, 𝑖𝑓 𝑝𝑡 ≥

, 𝑖𝑓 𝑝𝑡 ≥

,

,

𝑝𝑑 𝜃

𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒

.

(1)

(2)

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3.3 Optimization problems and decision analysis

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follows:

We consider the recycling channel configuration strategy of a recyclable dealer who can collect used products from a recycler at a certain price, and collect it also through an online recycling channel. To illustrate, when the dual-recycling channel strategy is better than the single recycling

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channel strategy, we start with a benchmark model: a recycling channel where the recyclable dealer

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collects used products through a single recycling channel. Besides, a centralized case acts as a benchmark to explore when a contract can be implemented to coordinate the dual-recycling channel

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reverse supply chain.

3.3.1 Single recycling channel

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(a) Single traditional recycling channel In a single traditional recycling channel, the recycler is responsible for collecting the used

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products from consumers and reselling them to the recyclable dealer. Based on the above analysis, 𝑝𝑠𝑡

we know that the collective quantity 𝑄𝑡𝑠𝑡 = ∫0 𝑡 𝑑𝑠 = 𝑝𝑡𝑠𝑡 . Therefore, the recyclable dealer’s 𝑠𝑡 priority is to maximize profit 𝛱𝑅𝐷 by optimally deciding the transferring price 𝑏𝑡𝑠𝑡 : 𝑠𝑡 max 𝛱𝑅𝐷 = 𝑄𝑡𝑠𝑡 (𝑤 − 𝑏𝑡𝑠𝑡 − 𝑐𝑝𝑑 ) 𝑠𝑡 𝑏𝑡

(3)

Similarly, the recycler will try to maximize profit 𝛱𝑅𝑠𝑡 by deciding the recycling price 𝑝𝑡𝑠𝑡 : max 𝛱𝑅𝑠𝑡 = 𝑄𝑡𝑠𝑡 (𝑏𝑡𝑠𝑡 − 𝑝𝑡𝑠𝑡 − 𝛥) 𝑠𝑡 𝑝𝑡

Note that the superscript “st” represents the single traditional recycling channel situation. 11

(4)

ACCEPTED MANUSCRIPT We derive the equilibrium condition through backward induction. For a given transferring price 𝑏𝑡𝑠𝑡 , it is straightforward to derive that the recycler’s profit function is concave in 𝑝𝑡𝑠𝑡 as 𝜕 2 (𝛱𝑅𝑠𝑡 )⁄𝜕(𝑝𝑡𝑠𝑡 )2 = −2. Therefore we can derive the recycler’s best response is 𝑝𝑡𝑠𝑡∗ =

𝑏𝑡𝑠𝑡 −𝛥 2

.

Similarly, by substituting 𝑝𝑡𝑠𝑡∗ into the equation (4), and it’s clear that the recyclable dealer’s profit 𝑠𝑡 function is concave in 𝑏𝑡𝑠𝑡 . By taking the first derivative order of 𝛱𝑅𝐷 with respect to 𝑏𝑡𝑠𝑡 and

𝑝𝑡𝑠𝑡∗ =

𝑤−𝛥−𝑐𝑝𝑑 4

𝑤+𝛥−𝑐𝑝𝑑 2

.

, and the optimal pricing of the recycler is

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equaling the equation to zero, we derive 𝑏𝑡𝑠𝑡∗ =

In addition, the optimal collective quantity and maximal profit for the recyclable dealer, recycler and the reverse supply chain system are 𝑄𝑇𝑠𝑡∗ = 𝑄𝑡𝑠𝑡∗ = 𝛱𝑅𝑠𝑡∗ =

(𝑤−𝛥−𝑐𝑝𝑑 )2 16

and 𝛱𝑇𝑠𝑡∗ =

3(𝑤−𝛥−𝑐𝑝𝑑 )2 16

, respectively.

4

𝑠𝑡∗ , 𝛱𝑅𝐷 =

(𝑤−𝛥−𝑐𝑝𝑑 )2 8

,

AN US

(b) Single online recycling channel

𝑤−𝛥−𝑐𝑝𝑑

Here, the reverse supply chain contains only the recyclable dealer who collects obsolete products via an online recycling channel. The collective quantity of the obsolete products is 𝑑𝑠 = 𝑝𝑑𝑠𝑑 ⁄𝜃 , so the recyclable dealer needs to set the recycling price

𝑝𝑑𝑠𝑑 to maximize his profit 𝛱𝑃𝑠𝑑 , i.e.

M

𝑝𝑠𝑑 ⁄𝜃

described as 𝑄𝑑𝑠𝑑 = ∫0 𝑑

𝑠𝑑 max 𝛱𝑅𝐷 = 𝑄𝑑𝑠𝑑 (𝑤 − 𝑝𝑑𝑠𝑑 − 𝛤 − 𝑐𝑝𝑑 ) 𝑠𝑑

(5)

ED

𝑝𝑑

Note that the superscript “sd” represents the single online recycling channel situation. 𝑤−𝛤−𝑐𝑝𝑑 2

PT

In this case, we derive that the optimal recycling price of the recyclable dealer is 𝑝𝑑𝑠𝑑∗ = . At the same time, we carry out the optimal collective quantity and the maximal profit for

(𝑤−𝛤−𝑐𝑝𝑑 )2

𝑠𝑑∗ and 𝛱𝑇𝑠𝑑∗ = 𝛱𝑅𝐷 =

(𝑤−𝛤−𝑐𝑝𝑑 )2 4𝜃

𝑤−𝛤−𝑐𝑝𝑑 2𝜃

𝑠𝑑∗ , 𝛱𝑅𝐷 =

.

AC

4𝜃

CE

the recyclable dealer and the reverse supply chain system is 𝑄𝑑𝑠𝑑∗ =

3.3.2 A centralized reverse supply chain with hybrid collection channels In a centralized reverse supply chain with hybrid collection channels (denoted by a superscript

C), both the recyclable dealer and recycler aim to maximize profit of the reverse supply chain system. Based on the recycling quantity functions expressed in (1) and (2), we can write the profit function for the recycler and the recyclable dealer as: 𝛱𝑇𝐶 (𝑝𝑡𝐶 , 𝑝𝑑𝐶 ) = 𝑄𝑡𝐶 (𝑤 − 𝑝𝑡𝐶 − 𝛥 − 𝑐𝑝𝑑 ) + 𝑄𝑑𝐶 (𝑤 − 𝑝𝑑𝐶 − 𝛤 − 𝑐𝑝𝑑 )

(6)

We mainly focus on the coordination issue for this sort of novel dual-channel structure.

12

ACCEPTED MANUSCRIPT Therefore, the constraint 𝑝𝑡𝐶 ≥ 𝑝𝑑𝐶 ⁄𝜃 must hold to ensure that both the recycler and the recyclable dealer will be involved in the dual-channel reverse supply system. Next, we will characterize the recyclable dealer’s channel configuration strategy in the following lemma. Lemma 1. If the condition of 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 is satisfied, then the constraint 𝑝𝑡𝐶 ≥ 𝑝𝑑𝐶 ⁄𝜃 holds. Proof: From the equation (6), we get the Hessian matrix of 𝛱𝑇𝐶 (𝑝𝑡𝐶 , 𝑝𝑑𝐶 ) with respect to 𝑝𝑡𝐶 −2𝜃

𝐻=

[𝜃−1 2 𝜃−1

CR IP T

and 𝑝𝑑𝐶 as 2 𝜃−1 −2 ], 𝜃−1

4

And the determinant of the Hessian matrix is det(𝐻) = 𝜃−1 > 0. Obviously, 𝛱𝑇𝐶 (𝑝𝑡𝐶 , 𝑝𝑑𝐶 ) is concave in 𝑝𝑡𝐶 and 𝑝𝑑𝐶 since 𝐻 is negative definite. Based on the Kuhn-Tucker condition, we 𝑤−𝛥−𝑐𝑝𝑑 2

and 𝑝𝑑𝐶∗ =

𝑤−𝛤−𝑐𝑝𝑑 2

AN US

derive that 𝑝𝑡𝐶∗ =

. To make sure the optimal decisions satisfy the 𝑤−𝛤−𝑐

constraint 𝑝𝑡𝐶 ≥ 𝑝𝑑𝐶 ⁄𝜃, the inequality must hold, i.e., 𝜃 ≥ 𝑤−𝛥−𝑐𝑝𝑑. 𝑝𝑑

Lemma 1 illustrates that customer acceptance of the online recycling channel should be greater

M

than the ratio of its maximal revenue over that of the traditional recycling channel. It also implies the recycler can be keep staying in the system if and only if the traditional recycling channel is

ED

reasonably profitable. At the same time, Lemma 1 ensures the optimal collection quantities of each channel are greater than zero, which helps us exclude an extreme case where the optimal collection quantities of the traditional channel do equal zero. Hence, this condition ensures that a strategic

PT

union can be achieved between the recyclable dealer and the recycler. When the consumer preference of the online recycling channel is low, i.e., 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1, the

CE

traditional recycling channel becomes more attractive and profitable, and then the recyclable dealer does not force the recycler to leave the system.

AC

Suppose 𝑤 = 4.2 , 𝛥 = 1.8 , 𝛤 = 1.6 , 𝑐𝑝𝑑 = 0.8. According to Lemma 1, we have

𝑝𝑡𝐶∗ = 0.8 and 𝑝𝑑𝐶∗ = 0.9, and it is clear that all customers will choose the online recycling channel to return their used products if the consumer preference of the online recycle channel 𝜃 is less than 9⁄8, and the corresponding collection quantities of traditional recycling channel are equal to zero. To provide a benchmark for the analysis of the following decentralized case with dual-recycling channel, then the condition is indispensable. In fact, the above condition is consistent with the reality as seen by Changhong Green Group Company Limited and Shanghai Xin Jinqiao Environmental Protection Company Limited, where most people who return their old products 13

ACCEPTED MANUSCRIPT through the traditional recycle channel instead of the online channel do so because consumers have less recognition, understanding, and acceptance of the online recycling channel.4 Theorem 1. In the centralized scenario, the optimal pricing policies are as follows: 𝑝𝑡𝐶∗ = 𝑤−𝛥−𝑐𝑝𝑑 2

and 𝑝𝑑𝐶∗ =

𝑤−𝛤−𝑐𝑝𝑑 2

.

Proof: Rearranging the equation (6), we derive 𝑝𝑑 − 𝑝𝑡 𝑝𝑑 − 𝑝𝑡 𝛱𝑇𝐶 (𝑝𝑡𝐶 , 𝑝𝑑𝐶 ) = (𝑝𝑡 − )(𝑤 − 𝑝𝑡𝐶 − 𝛥 − 𝑐𝑝𝑑 ) + (𝑤 − 𝑝𝑑𝐶 − 𝛤 − 𝑐𝑝𝑑 ) 𝜃−1 𝜃−1

𝑝𝑑𝐶∗ =

𝑤−𝛤−𝑐𝑝𝑑 2

.

𝑤−𝛥−𝑐𝑝𝑑

CR IP T

Assuming that 𝑝𝑡𝐶 ≥ 𝑝𝑑𝐶 ⁄𝜃 , from the proof of Lemma 1, then we have 𝑝𝑡𝐶∗ =

2

and

Furthermore, the optimal collective quantity for each recycling channel, the total collective quantity and the maximal profit of the reverse supply chain system in the centralized case is =

𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 ) 2(𝜃−1)

,

𝑄𝑑𝐶∗

𝛥−𝛤

= 2(𝜃−1) ,

respectively.

𝑄𝑇𝐶∗

=

𝑤−𝛥−𝑐𝑝𝑑

and

𝛱𝑇𝐶∗

AN US

𝑄𝑡𝐶∗

2

2

=

(𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 ) +(𝛥−𝛤)2 4(𝜃−1)

,

3.3.3 A decentralized reverse supply chain with dual recycling channel In a decentralized channel, the recyclable dealer and recycler are regarded as independent

M

decision makers, and each aims to maximize his profit. The sequence of events that happen is as follows: first, the recyclable dealer determines the recycling price 𝑝𝑑𝐷 and the transferring price 𝑏𝑡𝐷 ;

ED

and then the recycler decides the recycling price 𝑝𝑡𝐷 . Note that the superscript D means a decentralized channel. To keep the recycler from selling collected used products through the online recycling channel, the transferring price should be higher than the online recycling channel price, i.e.

PT

𝑏𝑡𝐷 ≥ 𝑝𝑑𝐷 . Based on the above analysis, profits of the recyclable dealer and recycler are expressed as 𝐷 𝐷 𝐷 (𝑝 𝐷 𝐷 ) 𝐷 𝐷 𝛱𝑅𝐷 𝑑 , 𝑏𝑡 = 𝑄𝑡 (𝑤 − 𝑏𝑡 − 𝑐𝑝𝑑 ) + 𝑄𝑑 (𝑤 − 𝑝𝑑 − 𝛤 − 𝑐𝑝𝑑 ).

(7)

𝛱𝑅𝐷 (𝑝𝑡𝐷 ) = 𝑄𝑡𝐷 (𝑏𝑡𝐷 − 𝑝𝑡𝐷 − 𝛥).

(8)

CE

follows:

AC

From expression (8), we derive that the recyclable dealer’s profit-maximizing problem is 𝐷 max 𝛱𝑅𝐷 = 𝑄𝑡𝐷 (𝑤 − 𝑏𝑡𝐷 − 𝑐𝑝𝑑 ) + 𝑄𝑑𝐷 (𝑤 − 𝑝𝑑𝐷 − 𝛤 − 𝑐𝑝𝑑 ) 𝐷 𝐷

(𝑝𝑑 ,𝑏𝑡 )

s. t. 𝑝𝑡𝐷 ≥ 𝑝𝑑𝐷 ⁄𝜃 and 𝑏𝑡𝐷 ≥ 𝑝𝑑𝐷 .

(9)

By backward induction we achieve Theorem 2 as below. Theorem 2. The optimal decisions of both the recyclable dealer and the recycler in the decentralized channel are given by 𝑏𝑡𝐷∗ = 4

𝑤+𝛥−𝑐𝑝𝑑 2

http://www.gerunzs.com/; http://www.gome.com.cn/;. http://www.xjqhb.com/en/

14

, 𝑝𝑑𝐷∗ =

𝑤−𝛤−𝑐𝑝𝑑 2

and 𝑝𝑡𝐷∗ =

𝑤−𝛥−𝑐𝑝𝑑 4

+

ACCEPTED MANUSCRIPT 𝑤−𝛤−𝑐𝑝𝑑 4𝜃

.

Proof: From the equations (1), (2) and (9), we derive the recycler best response function as follows: 𝐷 𝜕𝛱𝑅

𝜕𝑝𝑡𝐷

𝜕(𝑝𝑡𝐷 )2

𝐷 𝑝𝑑 −𝑝𝑡𝐷

𝜃−1

),

−2𝜃

= 𝜃−1 < 0, therefore, the profit function of the recycler obtains its maximal value

when optimal pricing 𝑝𝑡𝐷∗ satisfies

𝐷 𝜕𝛱𝑅

𝜕𝑝𝑡𝐷

= 0, i.e., 𝑝𝑡𝐷∗ =

𝐷 𝜃(𝑏𝑡𝐷 −𝛥)+𝑝𝑑

2𝜃

.

CR IP T

𝐷 𝜕 2 𝛱𝑅

Since

𝜃

= 𝜃−1 (𝑏𝑡𝐷 − 𝑝𝑡𝐷 − 𝛥) − (𝑝𝑡𝐷 −

𝐷 It is obvious that the profit function of the recyclable dealer 𝛱𝑅𝐷 is jointly concave with

respect to 𝑏𝑡𝐷 and 𝑝𝑑𝐷 , so the profit function has a unique maximum value. By solving equation (9), we have 𝑏𝑡𝐷∗ =

𝑤+𝛥−𝑐𝑝𝑑 2

and 𝑝𝑑𝐷∗ =

𝑤−𝛤−𝑐𝑝𝑑 2

.

optimal price of the recycler as 𝑝𝑡𝐷∗ = addition,

the

optimal

𝑄𝑡𝐷∗ =

𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )

𝑄𝑇𝐷∗ =

𝑤−𝛥−𝑐𝑝𝑑

𝑤−𝛤−𝑐𝑝𝑑 4𝜃

.

𝑤−𝛤−𝑐𝑝𝑑

+

4𝜃

The

4𝜃

16𝜃(𝜃−1)

for

each

recycling

+

supply

chain

respectively.

CE

2𝜃

+𝛥

𝑝𝑡𝐶∗ =

𝑤−𝛤−𝑐𝑝𝑑 2𝜃

.

profit

is

(𝑤−𝛤−𝑐𝑝𝑑 )2 4𝜃

and 𝛱𝑅𝐷∗ =

,𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )-2 16𝜃(𝜃−1)

𝑄𝑇𝐶∗ = 𝑄𝐷𝐶∗ =

Further,

𝑤−𝛥−𝑐𝑝𝑑 2

=

𝑤−𝛤−𝑐𝑝𝑑

𝑤−𝛥−𝑐𝑝𝑑 2𝜃

2

, 𝑏𝑡𝐷∗ =

and 𝛱𝑇𝐶∗ =

.

AC

(𝑤−𝛥−𝑐𝑝𝑑 )2

and

is

, and the profits of the recyclable dealer and the

Specifically, when 𝑝𝑡𝐷 ≤ 𝑝𝑑𝐷 ⁄𝜃 , then 𝑄𝑡𝐶∗ = 0 ; thus we derive 𝑝𝑑𝐶∗ = 𝑤−𝛤−𝑐𝑝𝑑

channel

system’s

PT

8𝜃(𝜃−1)

, we get the

𝛥−𝛤

reverse

,𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )-2

2𝜃

+ 4(𝜃−1) , and the total collected quantity is

3,𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )-2 +4(𝜃−1)(𝑤−𝛤−𝑐𝑝𝑑 )2

𝐷∗ recycler are 𝛱𝑅𝐷 =

𝐷 𝜃(𝑏𝑡𝐷 −𝛥)+𝑝𝑑

.

quantities

𝑤−𝛤−𝑐𝑝𝑑

ED

𝛱𝑇𝐷∗ =

4

+

4

collection

𝑄𝑑𝐷∗ =

,

4(𝜃−1)

𝑤−𝛥−𝑐𝑝𝑑

M

In

AN US

Further, by substituting 𝑏𝑡𝐷∗ and 𝑝𝑑𝐷∗ in the formulation of 𝑝𝑡𝐷∗ =

2𝜃

4 Recycling channel configuration In this section, we investigate the optimal recycling channel configuration strategy from the social efficiency point of view, and the perspective of the recyclable dealer and the reverse supply chain system. Note that with a larger amount of WEEEs, the better the social efficiency. In Table 2, the equilibrium in both single and dual-recycling channel cases is summarized, as well as optimal profits for the parties in a reverse supply chain, and the corresponding total profit for the reverse 15

ACCEPTED MANUSCRIPT supply chain system. Based on the results in Table 2, the following propositions are derived. Table 2 Equilibrium in the single/dual-recycling channel cases and their profits, and the corresponding total profit of the reverse supply chain system.

𝑏𝑡∗ 𝑄𝑇∗ 𝛱𝑅∗

𝑤 − 𝛥 − 𝑐𝑝𝑑 𝑤 − 𝛤 − 𝑐𝑝𝑑 + 4 4𝜃

CR IP T

𝑝𝑑∗

Dual-recycling channel (decentralized case)

𝑤−𝛤−𝑐𝑝𝑑

2

2

𝑤 + 𝛥 − 𝑐𝑝𝑑 n/a 2 𝑤 − 𝛤 − 𝑐𝑝𝑑 𝑤 − 𝛥 − 𝑐𝑝𝑑 2𝜃 4 2 (𝑤 − 𝛥 − 𝑐𝑝𝑑 ) n/a 16

𝑤 + 𝛥 − 𝑐𝑝𝑑 2 𝑤 − 𝛥 − 𝑐𝑝𝑑 𝑤 − 𝛤 − 𝑐𝑝𝑑 + 4 4𝜃 ,𝜃(𝑤 − 𝛥 − 𝑐𝑝𝑑 ) − (𝑤 − 𝛤 − 𝑐𝑝𝑑 )-2 16𝜃(𝜃 − 1) ,𝜃(𝑤 − 𝛥 − 𝑐𝑝𝑑 ) − (𝑤 − 𝛤 − 𝑐𝑝𝑑 )-2 (𝑤 − 𝛤 − 𝑐𝑝𝑑 )2 + 8𝜃(𝜃 − 1) 4𝜃

AN US

𝑝𝑡∗

Single recycling channel Traditional Online recycling recycling channel channel 𝑤 − 𝛥 − 𝑐𝑝𝑑 n/a 4 𝑤−𝛤−𝑐𝑝𝑑 n/a

(𝑤 − 𝛥 − 𝑐𝑝𝑑 )2 (𝑤 − 𝛤 − 𝑐𝑝𝑑 )2 8 4𝜃

𝛱𝑇∗

3(𝑤 − 𝛥 − 𝑐𝑝𝑑 )2 (𝑤 − 𝛤 − 𝑐𝑝𝑑 )2 3,𝜃(𝑤 − 𝛥 − 𝑐𝑝𝑑 ) − (𝑤 − 𝛤 − 𝑐𝑝𝑑 )-2 + 4(𝜃 − 1)(𝑤 − 𝛤 − 𝑐𝑝𝑑 )2 16𝜃(𝜃 − 1) 16 4𝜃

M

∗ 𝛱𝑅𝐷

ED

Proposition 1. From the social efficiency point of view, if the customer preference for the online recycling channel is higher, then the single online recycling channel strategy is the recyclable

PT

dealer’s optimal choice; if the customer preference for the online recycling channel is higher, then the recyclable dealer should choose the dual-recycling channel strategy. Proof: From the perspective of social efficiency, the more the collection quantity, the better the

CE

social efficiency. By comparing 𝑄𝑇𝑠𝑑∗ and 𝑄𝑇𝐷∗ , we achieve if 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , 𝑄𝑇𝐷∗ ≥ 𝑄𝑇𝑠𝑑∗ , otherwise, 𝑄𝑇𝑠𝑑∗ ≥ 𝑄𝑇𝐷∗ ; Similarly, by comparing 𝑄𝑇𝑠𝑡∗ and 𝑄𝑇𝑠𝑑∗ , we

AC

achieve if 𝜃 ≥ 2(𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , 𝑄𝑇𝑠𝑡∗ ≥ 𝑄𝑇𝑠𝑑∗ , otherwise 𝑄𝑇𝑠𝑑∗ > 𝑄𝑇𝑠𝑡∗ if and only if 2(𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 > 𝜃 > 1; It is obvious that 𝑄𝑇𝐷∗ > 𝑄𝑇𝑠𝑡∗ . From the above discussions, we get if 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , 𝑄𝑇𝐷∗ ≥

max *𝑄𝑇𝑠𝑑∗ , 𝑄𝑇𝑠𝑡∗ +

;

and

if

(𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 > 𝜃 > 1

,

we

have

𝑄𝑇𝑠𝑑∗ ≥ max *𝑄𝑇𝐷∗ , 𝑄𝑇𝑠𝑡∗ +. Proposition 1 reveals that the total collection quantities belong to the threshold principle; when the value of 𝜃 is below a threshold, then the collection quantities in a single online-recycling

16

ACCEPTED MANUSCRIPT channel model is more than the collection quantities in the single traditional recycling channel and the dual-recycling channel models; when the value of 𝜃 exceeds the threshold, then collection quantities for dual-recycling channel is more than the single. Proposition 2. From the recyclable dealer’s point of view, the dual-recycling channel strategy is always better than the single. Proof: As a profit-maximizing player, the dual-recycling channel strategy is always better than 𝑠𝑡∗ 𝑠𝑑∗ 𝐷∗ the single ones i.e. 𝛱𝑅𝐷 ≥ 𝑚𝑎𝑥 *𝛱𝑅𝐷 , 𝛱𝑅𝐷 +. By comparing the optimal profit of the recyclable

CR IP T

dealer in three cases, we derive

𝑠𝑡∗ 𝑠𝑑∗ 𝑠𝑑∗ 𝐷∗ 𝐷∗ If 𝜃 ≥ 2(𝑤 − 𝛤 − 𝑐𝑝𝑑 )2 (𝑤 − 𝛥 − 𝑐𝑝𝑑 )−2 , 𝛱𝑅𝐷 > 𝛱𝑅𝐷 > 𝛱𝑅𝐷 ; otherwise, 𝛱𝑅𝐷 ≥ 𝛱𝑅𝐷 ≥ 𝑠𝑡∗ 𝛱𝑅𝐷 .

Proposition 3. From the reverse supply chain system point of view, the dual-recycling channel

AN US

strategy is always better than single.

Proof: Similar to the proof of Proposition 2, we prove that Proposition 3 is correct. Propositions 2 and 3 illustrate that change of 𝜃 has no effect on the recyclable dealer’s recycling channel configuration, no matter what is the recyclable dealer’s perspective or the perspective of the reverse supply chain system. Profits of the recyclable dealer and the supply chain

M

system in dual-recycling channels are always greater than corresponding profits in a single recycling channel. In other words, both recyclable dealer and the reverse supply chain system

ED

benefit from a dual-recycling channel.

PT

5 Comparative static analysis

In this section, we provide some comparative statistics and study the relationship between

strategies.

CE

optimal pricing decisions, collection quantity, and the maximal profit under different channel

AC

Proposition 4. In a centralized scenario, recycling prices are independent of the value of consumer preference for the online recycling channel; the collective quantity for traditional/online recycling channel increases/decreases with the value of consumer preference for the online recycling channel; the total profit of the reverse supply chain system decreases with the value of consumer preference for the online recycling channel. Proof: By taking the first order derivative of 𝑝𝑡𝐶∗ and 𝑝𝑑𝐶∗ with respect to 𝜃 , we get 𝜕𝑝𝑡𝐶∗ 𝜕𝜃

=

𝐶∗ 𝜕𝑝𝑑

𝜕𝜃

= 0; therefore, the recycling prices do not rely on the value of the consumer preference

for the online recycling channel.

17

ACCEPTED MANUSCRIPT

Similarly, we have

𝜕𝑄𝑡𝐶∗ 𝜕𝜃

=−

𝜕𝑄𝑑𝐶∗ 𝜕𝜃

=

𝛥−𝛤 2(𝜃−1)2

> 0, which implies that the higher the valuation of

𝜃, the more the valuation of 𝑄𝑡𝐶∗ , and the less the valuation of 𝑄𝑑𝐶∗ , i.e., the more the consumer prefers the online recycling channel, the more the collective quantity via online recycling channel, and less collective quantity through a traditional recycling channel. Further we derive

𝐶∗ 𝜕𝛱𝑇

𝜕𝜃

𝛥−𝛤

= − 4(𝜃−1)2 > 0, which implies that the profit of the reverse supply

chain system decreases with the value of the consumer preference for the online recycling channel.

CR IP T

In other words, the less the value of consumer preference for the online recycling channel, the more the profit of the reverse supply chain system with a dual-recycling channel.

In the centralized channel, both recyclable dealer and the recycler pursuit to maximize total profit of the reverse supply chain results in the optimal recycling price for each recycling channel independent of the consumer preference for the online recycling channel. But, the advent of online

AN US

recycling channel promotes total collective quantity increase as recycling price for traditional recycling channel increases. And the consumer preference for the online recycling channel has no effect on total collective quantity, because of the incremental quantities in the online recycling channel equals to decrement in traditional recycling channels.

M

On the other hand, the consumer preference for the online recycling channel has a positive impact on total profit of the reverse supply chain. If the number of consumers who choose online

ED

recycling channel increases, the cost to collect the used products decreases. Hence, the reverse supply chain’s profit increases.

Proposition 5. In decentralized channel, the optimal collection price 𝑝𝑡𝐷∗ decreases with 𝜃, and

PT

both optimal collection price 𝑝𝑑𝐷∗ and transferring price 𝑏𝑡𝐷∗ are independent from 𝜃. In other words, the lower the value of 𝜃, the higher the recycling price 𝑝𝑡𝐷∗ .

𝐶∗ 𝜕𝑝𝑑

𝜕𝑏𝑑𝐶∗ 𝜕𝜃

𝜕𝑝𝑡𝐶∗ 𝜕𝜃

=−

𝑤−𝛤−𝑐𝑝𝑑 4𝜃2

< 0 and

= 0.

AC

𝜕𝜃

=

CE

Proof: It’s easily to prove that this conclusion is right, since

It infers that the consumer preference for the online recycling channel only affects the

recycler’s decision. Whether the consumer preference for the online recycling channel increases or not, the optimal decisions of the recyclable dealer remain the same. It also means that the recyclable dealer will use online recycling channel as a threat to influence the strategy of the recycler to increase a negotiated sharing of cooperative profits. Proposition 6. In the decentralized channel, the optimal collective quantity for the traditional recycling channel 𝑄𝑡𝐷∗ increases with 𝜃 ; and the optimal collective quantity for the online

18

ACCEPTED MANUSCRIPT recycling channel 𝑄𝑑𝐷∗ decreases with 𝜃; the total collective quantity for dual recycling channel 𝑄𝑇𝐷∗ decreases with 𝜃. Proof: Taking the first order derivative of 𝑄𝑡𝐷∗ , 𝑄𝑑𝐷∗ and 𝑄𝑇𝐷∗ regarding 𝜃 respectively, we have

𝜕𝑄𝑡𝐷∗ 𝜕𝜃

𝛥−𝛤

= 4(𝜃−1)2 > 0,

𝜕𝑄𝑑𝐷∗ 𝜕𝜃

=−

𝑤−𝛤−𝑐𝑝𝑑 4𝜃2

𝛥−𝛤

− 4(𝜃−1)2 < 0 and

𝜕𝑄𝑇𝐷∗ 𝜕𝜃

=−

𝑤−𝛤−𝑐𝑝𝑑 4𝜃2

< 0, then we

derive that Proposition 7 is correct. Generally, the higher the value of 𝜃, the less the consumer preference for the online recycling

CR IP T

channel, i.e., consumer prefers choosing traditional recycling channel over the online recycling channel. And the recycler just needs to pay a lower fee for one unit of used product as compared to the online recycling channel. Therefore, the bigger the value of 𝜃, the more the collective quantity for traditional recycling channel and less the collective quantity for the online recycling channel. Proposition 7. The optimal profit of the recycler in the decentralized mode increases with 𝜃, while

AN US

the maximal profit the recyclable dealer decreases with 𝜃, as also the total profit of the reverse supply chain system.

From Proposition 7, we know that as long as the value of consumer preference for the online recycling channel decreases, then both the recyclable dealer’s profit and the total profit of the reverse supply chain system increases whereas the profit of the recycler decreases. The result is

M

because the recycler has to improve recycling price to convince customers to return their e-wastes through the traditional recycling channel when the value of consumer preference for the online

ED

recycling channel decreases, as a consequence, the incremental profit due to the result from improved collected quantity is greater than the corresponding incremental cost. So, total profit of

PT

the reverse supply chain increases.

Proposition 8. When 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1, the optimal profit of the recycler in the

CE

decentralized dual-recycling channel mode increases with (𝑤 − 𝛥 − 𝑐𝑝𝑑 ) and decreases with (𝑤 − 𝛤 − 𝑐𝑝𝑑 ); and the recyclable dealer’s and the system’s optimal profit also increases with

AC

(𝑤 − 𝛥 − 𝑐𝑝𝑑 ) and (𝑤 − 𝛤 − 𝑐𝑝𝑑 ). Proposition 8 shows if the “marginal profit” for collecting a unit of used product through the

traditional recycling channel increases, then the profit of the recycler, the recyclable dealer and the reverse supply chain system increases; and if “marginal profit” for collecting a unit of used product through the online recycling channel increases, both the recyclable dealer’s profit and the reverse supply chain system’s optimal profit increase, but the recycler’s profit decreases. This is because the recyclable dealer prefers to improve the online recycling price to induce the customer to return used products through the online recycling channel as “marginal profit” increases.

19

ACCEPTED MANUSCRIPT 6 Coordination of a reverse supply chain with dual-recycling channel

Based on the above analysis, we know that the performance of the supply chain in centralized case is better than that in a decentralized case for

𝛱𝑇𝐷∗

−

𝛱𝑇𝐶∗

2

=

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )] 16𝜃(𝜃−1)

≥ 0. Although

many works investigate issues of coordination on the forward supply chain and closed-loop supply chain (Govindan et al.., 2014; Zeng et al.., 2014; De Giovanni et al.., 2014; etc.), only a few focus

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on the coordination of a reverse supply chain with dual-recycling channels, especially on a dual recycling-channel reverse supply chain situation. To address this gap in literature, we conduct an analysis framework to investigate the applications of some contracts to coordinate a dual-recycling channel reverse supply chain based on the previous works. 6.1 Revenue sharing contract

AN US

Assuming that the proportion of the total revenue distributed to the recyclable dealer is 𝛿, then the proportion of the total revenue that the recycler obtains as 1 − 𝛿. Thus, both the recyclable dealer and the recycler accept the revenue sharing contract (𝛿, 1 − 𝛿) if the following constraints hold true. ∗

∗

∗

∗

∗

∗

∗

∗

∗

M

(1 − 𝛿) .𝑄𝑡 + 𝑄𝑑 / 𝑤 + 𝑄𝑡 .𝑏𝑡 − 𝑝𝑡 − 𝛥/ ≥ 𝛱𝑅𝐷∗ ∗

∗

𝐷∗ 𝛿 .𝑄𝑡 + 𝑄𝑑 / 𝑤 − 𝑄𝑡 .𝑏𝑡 + 𝑐𝑝𝑑 / − 𝑄𝑑 (𝑝𝑑 + 𝛤 + 𝑐𝑝𝑑 ) ≥ 𝛱𝑅𝐷

(10) (11)

ED

Where the superscript “-” represents the revenue sharing contract. Once the contract offered by the recyclable dealer coordinates the reverse supply chain, then ∗

∗

∗

∗

∗

PT

we have 𝑄𝑡 + 𝑄𝑑 = 𝑄𝑇𝐶∗ , 𝑝𝑡 = 𝑝𝑡𝐶∗ , 𝑝𝑑 = 𝑝𝑑𝐶∗ and 𝑏𝑡 = 𝑏𝑡𝐶∗ . From equations (10) and (11), we derive the following:

CE

𝛿 ≤1−

AC

𝛿 ≥1−

2

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )] 8𝜃(𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 )𝑤

= 𝛿𝑚𝑎𝑥

2

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )] +(3𝜃−1)(𝑤−𝛤−𝑐𝑝𝑑 ) 4𝜃(𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 )𝑤

(12) 2

= 𝛿𝑚𝑖𝑛

(13)

Proposition 9. When 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , if the value of 𝛿 satisfies 𝛿 ∈ ,𝛿𝑚𝑖𝑛 , 𝛿𝑚𝑎𝑥 - , then the recyclable dealer can coordinate the reverse supply chain with dual-recycling channel by providing the contract (𝛿, 1 − 𝛿). The revenue sharing contract (𝛿, 1 − 𝛿), where the negotiated sharing 𝛿 in the range ,𝛿𝑚𝑖𝑛 , 𝛿𝑚𝑎𝑥 -, ensures both the recycler’s profit and the recyclable dealer’s profit more than that available in a decentralized dual-recycling channel. Therefore, this revenue sharing contract (𝛿, 1 − 𝛿) is accepted by the process and the recycler, but negotiating the value of 𝛿 depends on 20

ACCEPTED MANUSCRIPT the bargaining power of the recycler and the recyclable dealer. 6.2 Complementary contracts In the decentralized case, given the transferring price and the recycling price for the online recycling channel, 𝛱𝑅𝐷∗ is concave in 𝑝𝑡𝐷∗ , which gives 𝑝𝑡𝐷∗ =

𝐷 𝜃(𝑏𝑡𝐷 −𝛥)+𝑝𝑑

(14)

2𝜃

It is obvious that the recycling price for the online recycling channel in the decentralized case

CR IP T

equals that of the centralized case, i.e. 𝑝𝑑𝐶∗ = 𝑝𝑑𝐷∗ . Therefore, by modifying the transferring price in traditional recycling channel, the recyclable dealer can make the recycling price for the traditional recycling channel in a decentralized case equal that of the optimal recycling price for the traditional recycling channel in the centralized case. Note that “~” represents the coordination model. Thus we have

AN US

𝑤−𝛤−𝑐 𝑏̃𝑡∗ = 𝑤 − 𝑐𝑝𝑑 − 2𝜃 𝑝𝑑

(15)

By comparing 𝑏̃𝑡∗ and 𝑏𝑡𝐶∗ , we get 𝑏̃𝑡∗ > 𝑏𝑡𝐶∗ . Further, the optimal profit for the recycler, the recyclable dealer, and the dual-recycling channel reverse supply chain system in the coordination model is as follows: 2

2

2

+(𝛥−𝛤)2

.

M

(𝑤−𝛤−𝑐𝑝𝑑 ) ∗ ̃𝑅∗ = [𝜃(𝑤−𝛥−𝑐𝑝𝑑)−(𝑤−𝛤−𝑐𝑝𝑑 )] , 𝛱 ̃𝑅𝐷 ̃𝑇∗ = 𝛱𝑇𝐶∗ = (𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 ) 𝛱 = and 𝛱 4𝜃(𝜃−1) 4𝜃 4(𝜃−1)

Proposition 10. If 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1, the recyclable dealer can coordinate the

ED

reverse supply chain with dual recycling channel by offering a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ ). By offering a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ ) to the recycler, the recyclable dealer succeeds in coordinating

PT

the reverse supply chain and making the recycling prices in coordinating equal to that in the centralized case. Comparing the recycler’s and the recyclable dealer’s profits and the total profit in

CE

contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ ) with those in the decentralized case, we derive that both the recycler’s and the system’s profit are enhanced while the recyclable dealer’s profit is reduced, i.e., the contract doesn’t

AC

bring any benefit to the recyclable dealer. Next, we discuss two kinds of complementary agreements which coordinate the dual-recycling

channel reverse supply chain together with the above contract (a contract consisting of traditional recycling channel price and online recycling channel price). The two-part tariff agreement is feasible and effective to coordinate a forward dual channel supply chain, which is examined in literature. Also, we discover that this agreement coordinates the dual-recycling channel reverse supply chain together with a contract consisting of a traditional recycling channel price and an online recycling channel price if a lump sum fee that the recyclable dealer charges from the recycler to satisfy a certain condition. In addition, the combinational 21

ACCEPTED MANUSCRIPT contract allows both recyclable dealer and the recycler to experience a win-win situation. Obviously, the recycler will accept the two-part tariff agreement when the recyclable dealer offers a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹) where the lump sum fee 𝐹 that the recyclable dealer charges from the ̃𝑅∗ − 𝐹 ≥ 𝛱𝑅𝐷∗ , which yields recycler satisfies 𝛱 2

𝐹≤𝐹=

3[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )]

(16)

16𝜃(𝜃−1)

willing to provide a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹), which yields 2

𝐹≥𝐹=

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )] 8𝜃(𝜃−1)

CR IP T

∗ 𝐷∗ ̃𝑅𝐷 Similarly, when the fixed fee 𝐹 also satisfies 𝛱 + 𝐹 ≥ 𝛱𝑅𝐷 , then the recyclable dealer is

(17)

Considering equations (16) and (17), when the recyclable dealer offers a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹) to the recycler, the increment of the reverse supply chain system’s profit equals to 𝐹 − 𝐹 as

AN US

compared to optimal profit in the decentralized case.

Proposition 11. When 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , if fixed fee 𝐹 that the recyclable dealer charges from the recycler satisfies 𝐹 ∈ ,𝐹 − 𝐹-, a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹) not only coordinates the reverse supply chain with dual-recycling channel, but also ensures the recycler and the recyclable dealer are in a win-win situation.

M

Apparently, with the contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹), the fixed fee 𝐹 offered by the recyclable dealer

ED

satisfies 𝐹 ∈ ,𝐹 − 𝐹- and could be accepted by both the recycler and the recycler. This contract ensures profit for both the recycler and the recyclable dealer if the coordinating model is higher than

PT

that in the decentralized case. However, the value of 𝐹 relies on the bargaining position between the recycler and the recyclable dealer to a great extent.

CE

Indeed, it was proved that a Stackelberg leader is always willing to offer a revenue/profit sharing contract to coordinate the supply chain (Govindan et al., 2012) except for the two-tariff

AC

agreement. And we find that a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ ) together with a profit sharing contract between the recyclable dealer and the recycler can coordinate the dual-recycling channel reverse supply chain, ensuring that both recycler and the recyclable dealer earn more profit. Assume the proportion of profit of the recyclable dealer is 𝛼, then the proportion of profit share of the recycler is 1 − 𝛼, where 0 ≤ 𝛼 ≤ 1 . When 𝜃 > (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , the contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝛼) is ̃𝑅∗ ≥ 𝛱𝑅𝐷∗ and (1 − preferred by the recyclable dealer and the recycler if and only if, both 𝛼𝛱 ∗ 𝐷∗ ̃𝑅𝐷 𝛼)𝛱 ≥ 𝛱𝑅𝐷 are satisfied. ∗ 𝐷∗ ̃𝑅∗ ≥ 𝛱𝑅𝐷∗ and (1 − 𝛼)𝛱 ̃𝑅𝐷 By solving the inequalities 𝛼𝛱 ≥ 𝛱𝑅𝐷 , we derive that the profit

share of the recyclable dealer satisfies 22

ACCEPTED MANUSCRIPT 2

𝛼 ≥ 𝛼𝑚𝑖𝑛 =

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )]

(18)

2

4𝜃,(𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 ) +(𝛥−𝛤)2 2

𝛼 ≤ 𝛼𝑚𝑎𝑥 = 1 −

[𝜃(𝑤−𝛥−𝑐𝑝𝑑 )−(𝑤−𝛤−𝑐𝑝𝑑 )] +2(𝜃−1)(𝑤−𝛤−𝑐𝑝𝑑 )2

(19)

2

4𝜃,(𝜃−1)(𝑤−𝛥−𝑐𝑝𝑑 ) +(𝛥−𝛤)2 -

Proposition 12. When 𝜃 ≥ (𝑤 − 𝛤 − 𝑐𝑝𝑑 )(𝑤 − 𝛥 − 𝑐𝑝𝑑 )−1 , if 𝛼 belongs to ,𝛼𝑚𝑖𝑛 , 𝛼𝑚𝑎𝑥 - , a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝛼) offered by the recyclable dealer can completely coordinate the reverse supply chain with dual-recycling channel.

CR IP T

When the recyclable dealer offers a contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝛼) where the profit share 𝛼 is in the range of ,𝛼𝑚𝑖𝑛 , 𝛼𝑚𝑎𝑥 -, both the recyclable dealer and the recycler benefit from the coordinating model, and the reverse supply chain with dual recycling also becomes better if compared to a decentralized case. Similarly, the value of the profit sharing ratio relies on the bargaining power of

AN US

the recyclable dealer and the recycler. 7 Numerical examples

In this section, some numerical examples are presented to illustrate the analytical results and to explain how the consumer preference for the online recycling channel affects the channel It verifies that the above two contracts can coordinate the dual-recycling

M

configuration strategy.

channel reverse supply chain. The results of numerical examples are outlined in the following 𝑤−𝛤−𝑐

15 23

ED

Figures, where 𝑤 = 4.5, 𝛥 = 2, 𝛤 = 1.8, 𝑐𝑝𝑑 = 1.2, and 𝜃 ≥ 𝑤−𝛥−𝑐𝑝𝑑, 𝜃 ∈ ,13 , 13-. 𝑝𝑑

From Fig. 2, it is inferred that when the value of 𝜃 is below a threshold, the collective

PT

quantity in case of the single online recycling channel is higher than the collective quantities in other cases. But when the value of 𝜃 exceeds a threshold, the collective quantity for the dual-

CE

recycling channel is greater than those in the single recycling channel cases. In addition, the collective quantities always decrease with 𝜃 for any case that involves the online recycling channel.

AC

This is due to the increase in the value of 𝜃: consumers prefer to return their used products through the traditional recycling channel rather than the online recycling channel, resulting in the recycler reducing the recycling price in the traditional recycling channel. Thus, the total collective quantity decreases.

Figs. 3-4 show that the change in the value of 𝜃 has no effect on the recyclable dealer’s recycling channel configuration. From the perspective of both the recyclable dealer and the reverse supply chain system, profits in dual recycling channel for the recyclable dealer and the reverse supply chain system is always greater than corresponding profits in the single recycling channel . In other words, the dual-recycling channel benefits both the recyclable dealer and the reverse supply 23

ACCEPTED MANUSCRIPT chain system. And we also understand that the profits decrease with the value of 𝜃, as the increased profit obtained through collecting more units of used product is less than the increased cost when the value of θ is very high. 0.6

0.8

QT

St Sd D

0.7 0.6

St Sd D

0.5

P 0.4

0.5 0.4

0.3

0.2

0.2 0.1

1

1.5

2

2.5



3

3.5

4

4.5

0.1

5

Fig. 2 Range of the total collection quantity

𝑄𝑇∗ .

1.5

1

2.5

 3

3.5

4

4.5

5

 max

St Sd D

0.9



0.4

 min

AN US

T

2

∗ Fig. 3 Range of the recyclable dealer’s profit 𝛱𝑅𝐷 .

0.6

0.5

CR IP T

0.3

0.8

0.3

0.7

0.2

0.6

0.1

1.5

2

2.5



3

3.5

4

4.5

5

0

M

Fig. 4 Range of the total supply chain’s profit 𝛱𝑇∗ . 0.35 0.3

F

ED

F

0.25 0.2 0.15

F

0.05 0

0

5

PT

0.1



10



10

15

20

Fig. 5 Range of 𝛿 for contract (𝛿, 1 − 𝛿). 0.5



0.4

 max

0.3 0.2

 min

0.1 0

15

5

20

0

5



10

15

20

CE

Fig. 6 Range of 𝐹 for contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝐹). Fig. 7 Range of 𝛼 for contract (𝑏̃𝑡∗ , 𝑝̃𝑑∗ , 𝛼). Fig. 5 shows that as 𝜃 increases, 𝛿𝑚𝑎𝑥 decreases and 𝛿𝑚𝑖𝑛 increases, which implies the

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superiority of the hybrid recycling channel under the revenue sharing contract and the space of the sharing ratio 𝛿 becomes larger as the consumer preference for the online recycling channel strengthens. The relative price to collect a WEEE unit through an online recycling channel increases when the consumer preference for the online recycling channel is strengthened, which improves the competitive advantage of the recyclable dealer. It also indicates that the recyclable dealer has more negotiating power on 𝜃 in the revenue sharing contract (𝛿, 1 − 𝛿). But, as the results show in Figs. 6-7, with the increase in 𝜃, the upper bound ( 𝐹 or 𝛼𝑚𝑎𝑥 ) increases and the lower bound ( 𝐹 or 𝛼𝑚𝑖𝑛 ) decreases, implying that the superiority of a 24

ACCEPTED MANUSCRIPT coordinated dual-recycling channel is enhanced and the difference between the upper bound 𝐹 and the lower bound 𝐹 or (the space for sharing ratio 𝛼) becomes larger as the consumer preference for the online recycling channel weakens. The recycler has more negotiating power on 𝐹 or 𝛼 compared to the complementary agreements. In addition, in Figs. 5-7, when the consumer preference for the online recycling channel strengthens, the recyclable dealer prefers revenue sharing contract rather than the combinational

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contracts, and vice versa, when the consumer preference for the online recycling channel weakens, the recyclable dealer prefer the combinational contracts rather than the revenue sharing contract. In other words, the more the customer prefers the online recycling channel, the higher the probability of the revenue sharing contracts that are accepted by the members in the reverse supply chain; otherwise, the less the customer prefers the online recycling channel, then the higher the possibility

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of the combinational contracts that are accepted by the members in the reverse supply chain. From Table 2, we can see the disposal costs have an important impact on the collection quantity, and each party’s profit as well as the system’s profit; therefore, a sensitivity analysis of this parameter is provided and summarized as Table 3, where 𝑤 = 4.5, 𝛥 = 2, 𝛤 = 1.8 and 𝜃 = 2. The results show that the collection quantities, the recyclable dealer’s profits, and the system’s

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profits all decrease as the disposal cost 𝑐𝑝𝑑 increases. In addition, even though under the dual-recycling channel case, the recyclable dealer’s profit decreases more rapidly than in the

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single-recycling channel case, it is always greater.

Table 3. Varies of 𝑄 𝑖∗ , 𝜋𝐷𝑖∗ and 𝜋𝑇𝑖∗ w.r.t. 𝑐𝑝𝑑 . 𝑄 𝑠𝑡∗

𝑄 𝑠𝑑∗

0.2 0.4 0.6 0.8 1 1.2 0.4 1.6 1.8 2

0.575 0.525 0.475 0.425 0.375 0.325 0.275 0.225 0.175 0.125

0.625 0.575 0.525 0.475 0.425 0.375 0.325 0.275 0.225 0.175

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𝑄 𝐷∗

𝜋𝐷𝑠𝑡∗

𝜋𝐷𝑠𝑑∗

𝜋𝐷𝐷∗

𝜋𝑇𝑠𝑡∗

𝜋𝑇𝑠𝑑∗

𝜋𝑇𝐷∗

0.888 0.813 0.738 0.663 0.588 0.513 0.438 0.363 0.288 0.213

0.661 0.551 0.451 0.361 0.281 0.211 0.151 0.101 0.061 0.031

0.781 0.661 0.551 0.451 0.361 0.281 0.211 0.151 0.101 0.061

1.057 0.887 0.732 0.592 0.467 0.357 0.262 0.182 0.117 0.067

0.992 0.827 0.677 0.542 0.422 0.317 0.227 0.152 0.092 0.047

0.781 0.661 0.551 0.451 0.361 0.281 0.211 0.151 0.101 0.061

1.195 1.000 0.822 0.662 0.520 0.395 0.287 0.197 0.125 0.070

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𝑐𝑝𝑑

Conclusions In this paper, we studied the strategic planning on the optimal design and coordination

decisions of the recyclable dealer. By incorporating the consumer preference for the online recycling channel into the consumer recycling channel choice, a detailed model is constructed 25

ACCEPTED MANUSCRIPT where the collective quantity in each recycling channel relies on the consumer’s return willingness. We investigated the channel configuration strategy and found a condition where the single recycling channel model is a dominated strategy compared to the dual-recycling channel model. Further we explored how the recyclable dealer, as a Stackelberg leader, coordinates the reverse supply chain with the dual-recycling channel. Several useful and meaningful managerial insights were derived and summarized as follows. First, the online recycling channel can serve as a lever to force the recycler to enhance the

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recycling price in traditional recycling channel and to help the recyclable dealer and the reverse supply chain system improve profits. Specifically, with the relevant legislation on environmental protection increasing, the strategy about opening the dual-recycling channel strategy helps enterprises to fulfill their duties and promotes their green-image. We further extend the analysis by examining the coordination of the reverse supply chain, and find that the revenue sharing contract

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can coordinate the reverse supply chain and allow both the recyclable dealer and the recycler to be in a win-win situation.

In addition, based on a contract with a traditional recycling price and online recycling channel price, we propose two kinds of complementary agreements which can successfully coordinate the reverse supply chain system. On the other hand, we find the consumer preference for the online

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recycling channel plays an important role in the recyclable dealer’s choice of coordination mechanism, i.e. the recyclable dealer prefers the revenue sharing contract to the combinational

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contracts when it is strengthened and, vice versa, the recyclable dealer prefers the combinational contracts to the revenue sharing contract when it is weakened.

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This study offers some significant insights into the recycling channel configuration and dualrecycling channel reverse supply chain coordination. It provides a theoretical reference for

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corporations’ operational decisions; there are several interesting extensions of this work that should be considered in future research. This paper investigated the case of a recyclable dealer as a

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dominated leader; a possible extension can be achieved by incorporating the leadership into the analysis like Choi et al. (2013). As we only investigated the above questions in a two-echelon reverse supply chain, another promising direction is to explore a reverse supply chain with multi-echelon or infinite periods as seen in Ferrer et al.. (2010), Govindan et al. (2014), and Yoo et al. (2016). Finally, the pick-up and collective model of the stochastic collection mode will be close to the practice like Li et al. (2014) and Qiang et al. (2013). Future research can consider the above issues, to investigate the reverse channel selection choice and coordination strategy, or to explore the other operational problems considering the dual closed-loop supply chain situation. All of these issues provide a wonderful and fertile area for the future research. 26

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