Carrot/stick mechanisms for collection responsibility sharing in multi-tier closed-loop supply chain management

This paper studies the government’s carrot/stick (reward-penalty) mechanisms for the core collection responsibility in a multi-tier closed-loop supply chain (CLSC). Within a Stackelberg game with the manufacturer as the leader, our study identifies the optimal reward-penalty mechanisms (hereafter RPMs) in three sharing modes of responsibility for the used product collection: (i) a CLSC without the RPM, (ii) a CLSC with the RPM imposed on the manufacturer only, and (iii) a CLSC with the RPM enforced on both the manufacturer and the retailer. From a collection rate and social welfare perspective, we find that it is optimal to put the collection responsibility on the manufacturer only, and the government should force a relatively high reward-penalty intensity on the manufacturer. Although the mode with the RPM imposed only on the manufacturer results in the highest buy-back price and the lowest wholesale price, this is the social responsibility the manufacturer must bear to benefit the environment. Finally, the numerical results show that the collection rate rises as the reward-penalty intensity and the sharing ratio of the manufacturer. Besides, high reward-penalty intensity and high sharing ratio are conducive to improving social welfare.