Abstract:

 The rapid development of science and technology has resulted in a lot of waste electrical and electronic equipment (WEEE) all around the world, especially in China. The quantity of WEEE is fast growing every year. In addition, it is reported that the annual amount of electronic waste illegally transferred to China for dismantling is at least 1.5 million tons, which has brought serious environmental and social problems. The environmental problems have become more serious and also aroused the attention of the public and government.Although the existing literature has investigated the collection channels or pricing decisions in a closed-loop supply chain, few of them focus on the dual collection channels. Generally, there are two main channels for consumers to dispose used WEEE, including formal channel and informal channel. In a formal channel, the collector collects and dismantles WEEE in accordance with national regulations. In an informal channel, however, the collector only pursuits profit and does not take the environmental impact into account. Therefore, the informal collector may collect WEEE at higher price to compete with the formal collector. Driven by the interests, consumers only consider the price factor, resulting in a large number of WEEE flowing to the informal channel. Chinese government has implemented a series of policies to improve such dilemma, of which the subsidy policy is an important and effective measure. Some literature has studied the role of government subsidy policy in collecting WEEE. Most of them, however, study the government subsidies only in a single collecting channel, neglecting the coexistence of different collecting channels.The contributions of our study are twofold. Firstly, the existing literature assumes that there exist three modes for the formal collector to handle WEEE, including refurbishment treatment, raw material recovery and parts recycling, and two modes for the informal collector, including refurbishment and raw material recovery. In recent years, since there have been many major accidents due to the renovation of used-of-life products, which damage the consumers, the government hopes that formal collectors do not refurbish used-of-life products. The behavior of informal collectors, however, is difficult to control, and the informal collectors prefer to recycle parts and resell them. Through an investigation of business practices, we put forward to more practical assumptions that the formal collectors recycle raw materials and recycle parts and components, while the informal collectors renovate used-of-life products, recycle raw materials and recycle parts. Second, the existing literature assumes that government subsidizes the formal collectors only if they recycle raw materials and parts simultaneously. In our study, we assume that, no matter which processing mode the formal collectors choose, the government will subsidizes them. This assumption is consistent with China′s waste electrical and electronic equipment fund-subsidy mechanism, which motivate the collector to recycle more used-of life products rather than reusing. Thus, our assumption is more in line with the actual situation. Based on the above contributions, we develop a dual-recovery channel price competition model, which includes a formal collector and an informal collector, to explore the guiding role of government subsidies.Given that the government offers the regular collector subsidy to encourage it to collect more WEEE, this paper studies the guidance of government subsidy to price competition in a dual-collection-channel of WEEE collection. We develop a dual-collection-channel model including a regular collector and an irregular collector, who compete for the collecting price, to explore the impact of subsidy on collecting quantity, collecting price and the collectors′ profits.In this model, the regular collector collects and handles WEEE according to the legislation in which the environmental issues are considered, while the irregular collector collects and handles WEEE only for profit, and the irregular collector does not consider the environmental impact on consumers and society. Through analyses and numerical experiments, we obtain several findings. The findings include the following: (i) with the increase of subsidy, the collecting quantity of regular collector boosts, and the collecting amount of irregular collector reduces, but the sum of collecting quantity increases. (ii) as government subsidy increases, both of the collecting prices promote; the collecting price of regular collector is higher than that of irregular collector in different quality range, if the difference of unit profit between irregular and regular collectors is less than the government subsidy, otherwise, the result is opposite; (iii) government subsidy can effectively guide the regular channels and confine the irregular channels; (iv) meanwhile, government subsidies can effectively guide formal collecting channel and curb informal collecting channel, and enable consumers to obtain more government subsidy indirectly; the existence of the irregular channels can restrain the regular channels who gain profits only by government subsidy, if government offers more subsidy; moderate government subsidy is beneficial to increase the total collection quantity of used-of-life products.There are several managerial insights for different stakeholders. For informal collectors, it is always the optimal way to collect more WEEE and force the informal collectors to give up collecting. When government subsidizes the informal collectors, the informal collectors can set higher collection price to strengthen competition with informal collectors, rather than increase profit by such subsidy. If the informal collectors quit collecting market, the informal collectors can monopolize the used-of-life products market and it becomes easy to meet the objective of government and improve environment. For government, it is not always beneficial to improve environmental outcomes if government set a higher subsidy quota. This is because the formal collector will gain profit only from the subsidy, rather than collecting WEEE. Setting a relatively modest subsidy is dominant for government, since it can not only effectively enhance the total quantity of WEEE, but also motivate the formal collector to focus on recycle used-of-life products and improve environment impact.Our research has certain limitations. The results obtain in our study are all under the condition of complete information symmetry. In practice, information asymmetry may be common and some interesting findings can be obtained in such setting. When demand is random, the collection decisions will become more complex, and how to subsidy the collectors in a competitive environment will be an interesting issue for government. Therefore, demand uncertainty is also an interesting direction.

Key words: government subsidy, dual-channel of collection, WEEE, competition of collection price