Integrating game theory and data-driven optimization models for online retailers with reusable packaging adoption

Abstract

The rapid growth of e-commerce leads to a boom in packaging waste. To address this challenge, online retailers are partnering with reusable packaging service platforms to use reusable packaging. Most of the previous studies on reusable packaging adoption and operations ignore the pattern of online retailers hybridizing disposable and reusable packaging and the critical role of real demand data in optimizing inventory management. This paper investigates the online retailers’ hybrid packaging ordering strategy and the reusable packaging service platform’s pricing strategy by analyzing a comprehensive dataset of 456,548 transaction records over 145 weeks. Two decision support models (the separated and integrated models) are proposed by integrated data-driven and game-theoretical methods for optimizing the ordering and pricing decisions of reusable packaging. The results illustrate that the integrated model always performs superior to the separated model in terms of promoting reusable packaging adoption, and the profits of the online retailer and the service platform. Furthermore, government subsidies can enhance the adoption of reusable packaging by online retailers, but excessive subsidies may lead to over-ordering especially when the use cost of reusable packaging is low. Plastic taxes can also incentivize online retailers to embrace reusable packaging, but the incentive effect diminishes as the taxes increase.