Track: Sustainable Manufacturing
Abstract
In the waste electrical and electronic equipment (WEEE) collection, the manufacturer can select reverse channel strategies between third-party-managed collection (Model 3P) and retailer-managed collection (Model R). However, he has to face up with collector’s collection cost information asymmetry (IA), and the implementation of Extended Producer Responsibility (EPR) policies. We first derive, in closed forms, the optimal contracts for Model R and 3P, in joint consideration of EPR and IA. Meantime, we find complementary effect between IA and EPR. Our subsequent model comparison illustrates how to optimally select the mode of business, i.e. Retailer collection or collection by 3rd Party. The former is preferred if the manufacturer faces up with stricter EPR policies. If the magnitude of IA is higher, the latter would be a better option, because third party collection is less sensitive to IA but more sensitive to the EPR policies. Moreover, the presence of IA boosts the retail price and lower the demand due to the decrease of collection rate, while the EPR policies have just opposite effects on price and demand. Hence, the price, demand and collection rate all depend on the comparison between the magnitude of IA and EPR.