The role of online platform selling mode in recycling channel selection: A game-theoretic analysis of profit and environmental impact

Abstract

In this paper, we develop a game theoretical model to investigate the effects of an online platform’s choice between selling modes (reselling and agency selling) on the manufacturer’s recycling channel selection when the online platform not only acts as a marketplace provider but also serves as a recycler. We find that the manufacturer should adopt agency selling (reselling) when the agency fee is low (high) and recycle used products directly from consumers under agency selling. When the agency fee is moderate, there is a Pareto improvement zone in the supply chain system. Our study also indicates that, surprisingly, as recycling cost decreases or consumers become less price-sensitive, the online platform may be induced to offer agency selling rather than reselling. The increased total profit further expands the “win-win” region, especially when compared to a scenario without remanufacturing. This implies that the induction effect becomes more pronounced, and that a Boxed Pig Game equilibrium (either the manufacturer or the online platform) may arise under agency selling. Furthermore, from an environmental impact perspective, we find that a higher return rate does not necessarily result in better environmental outcomes. Reselling always presents a conflict between economic and environmental goals, but agency selling allows for their coordination. More interestingly, it is insightful to show that the improvement of the triple bottom line outcome is achievable under agency selling when recycling costs, agency fees, and remanufacturing emissions are low as compared to reselling.