Impact of government subsidies on pricing strategies in reverse supply chains of waste electrical and electronic equipment

Abstract

Many governments use subsidies to encourage the recycling of waste electrical and electronic equipment. In order to assist policymakers in maximizing the benefit of these incentives, this paper investigates strategies for the allocation strategy of government subsidies among the parties in the reverse supply chain of e-waste consisting of one collector, one remanufacturer and two retailers. The optimal pricing decisions and effects of government subsidies with multiple subsidized parties are examined. Analytical results suggest that the remanufacturing utilization rate has great influence the allocation strategy of government subsidies. When the e-waste remanufacturing utilization rate is low, the marginal effect of the subsidy to the remanufacturer on economic benefit and the recycle quantity decreases as the subsidy increases. In this situation, the government should subsidize the collector and retailers. And when the e-waste remanufacturing utilization rate is relatively high, the marginal effect of the subsidy to the remanufacturer on economic benefit and the recycle quantity increase as the subsidy increases. In this case, the government should allocate as much support as possible to the remanufacturer.

Keywords: Government subsidy; Pricing strategy; Subsidy mechanism; Three-echelon reverse supply chains; Waste electrical and electronic equipment.