Volume 55, Number 6, November-December 2021
|Page(s)||3359 - 3378|
|Published online||15 November 2021|
Government incentive mechanism of closed-loop supply chain based on information asymmetry
Department of Economic Management, North China Electric Power University, Baoding 071100, P.R. China
* Corresponding author: email@example.com
Accepted: 8 August 2021
Focusing on the closed-loop supply chain (CLSC) comprising the manufacturer, retailer, and consumers in the waste products market, this study investigates how the government addresses the adverse selection problem on the hidden recovery costs of retailer and how it manages the moral hazard problem on the level of retailer’s hidden efforts. Based on incentive theory, a government incentive regulation aiming at maximizing social welfare is established in this study. In addition, a list of contracts with transfer payments is presented to elucidate the retailer’ collection efficiency and motivate the retailer to make the optimal investment. Besides, the impact of related factors on the recovery cost and social welfare level using numerical simulations is validated. Under government regulation, the retailer could maximize profit only by reporting the true recovery technology-type information to the government. Moreover, the retailer with high-recovery efficiency could obtain both retained profit and additional information rent. Finally, as the retailer made efforts to increase the recovery level, it increased investment cost, which affected the enthusiasm of enhancing the retailer’s recovery efficiency. Thus, the government should not blindly pursue the enhancement of recycling efficiency regardless of the cost, but should focus more on the control of recycling equipment and technology cost. Overall, this study facilitates scientific policy development and provides a reference for promoting CLSC operations.
Mathematics Subject Classification: 90B06
Key words: Adverse selection / moral hazard / Closed-loop supply chain / government incentive regulation model / game model
© The authors. Published by EDP Sciences, ROADEF, SMAI 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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