Reward-penalty Mechanism for Reverse Supply Chain Network with Asymmetric Information and Carbon Emission Constraints

Abstract

We discuss the government's reward and penalty mechanism in the presence of asymmetric information and carbon emission constraint when downstream retailers compete in a reverse supply chain network. Considering five game models which are different in terms of the coordination structure of the reverse supply chain network and power structure of the reward-penalty mechanism: (1) the reverse supply chain network centralized decision-making model; (2) the reverse supply chain network centralized decision-making model with carbon emission constraint; (3) the retailers' competition reverse supply chain network decentralized decision-making model; (4) the retailers' competition reverse supply chain network decentralized decision-making model with carbon emission constraint; (5) the retailers' competition reverse supply chain network decentralized decision-making model with carbon emission constraint and the government's reward-penalty mechanism. Building the participation-incentive contract under each model use the principal-agent theory, and solving the model use the Lagrange multiplier method. We can get the following conclusion: 1) when the government implements the reward-penalty mechanism for carbon emission and recycling simultaneously, the recycling rate as well as the buy-back price offered by the manufacturer are higher than those when the government conducts reward-penalty mechanism exclusively for carbon emission; 2) when the government implements carbon emission constraint, both retailers' selling prices of the new product are higher than those when no carbon emission constraint is forced; 3) there is no certain relationship between the two retailers' selling prices of the new product when the government implements the reward-penalty mechanism only for carbon emission and when it implements the mechanism for carbon emission as well as recycling.