Reward-penalty Mechanism for Reverse Supply Chain Network with Asymmetric Information and Carbon Emission Constraints

TL;DR

This paper analyzes how government reward-penalty mechanisms influence reverse supply chain decisions under asymmetric information and carbon constraints across different decision-making models, revealing impacts on recycling rates, pricing, and emission levels.

Contribution

It develops a comprehensive game-theoretic framework for reverse supply chains with reward-penalty mechanisms considering asymmetric information and emission constraints, comparing centralized and decentralized models.

Findings

Reward-penalty for both emissions and recycling increases recycling rates and buy-back prices.

Carbon emission constraints lead to higher retail prices for new products.

No clear relationship between retail prices under different reward-penalty schemes.

Abstract

We discuss the government's reward and penalty mechanism in the presence of asymmetric information and carbon emission constraint when downstream retailers compete in a reverse supply chain network. Considering five game models which are different in terms of the coordination structure of the reverse supply chain network and power structure of the reward-penalty mechanism: (1) the reverse supply chain network centralized decision-making model; (2) the reverse supply chain network centralized decision-making model with carbon emission constraint; (3) the retailers' competition reverse supply chain network decentralized decision-making model; (4) the retailers' competition reverse supply chain network decentralized decision-making model with carbon emission constraint; (5) the retailers' competition reverse supply chain network decentralized decision-making model with carbon emission constraint and the government's reward-penalty mechanism. Building the participation-incentive contract under each model use the principal-agent theory, and solving the model use the Lagrange multiplier method. We can get the following conclusion: 1) when the government implements the reward-penalty mechanism for carbon emission and recycling simultaneously, the recycling rate as well as the buy-back price offered by the manufacturer are higher than those when the government conducts reward-penalty mechanism exclusively for carbon emission; 2) when the government implements carbon emission constraint, both retailers' selling prices of the new product are higher than those when no carbon emission constraint is forced; 3) there is no certain relationship between the two retailers' selling prices of the new product when the government implements the reward-penalty mechanism only for carbon emission and when it implements the mechanism for carbon emission as well as recycling.