Platform or direct channel: government-subsidized recycling strategies for WEEE

We investigate how government subsidies affect pricing and service-quality strategies under different online-recycling channel structures. We consider two cases: the monopoly case, where the manufacturer recycles by itself, and the coopetition case, where a platform and the manufacturer compete for used products while the platform provides services to the manufacturer. We find the optimal price and service-quality strategies in these two cases with or without government subsidy. We also examine the recycling outcomes in terms of total recycling quantities and the parties’ profits. We find that with government subsidy, in the monopoly case, the manufacturer is motivated to increase both acquisition price and service quality and thus achieves higher recycling quantities and profit. In the case of coopetition, the manufacturer enjoys similar benefits from subsidy, but the platform suffers. The manufacturer gains competitive advantage from subsidy by offering a higher acquisition price, which forces the platform to increase acquisition price as well. To compensate for this increased cost, the platform must lower service quality, which leads to lower recycling quantities and profits. Only when the subsidy is high enough can the platform benefit. We also show that a subsidy can increase the total recycling quantity of the system only when consumers are fairly insensitive to service quality. Our study contributes to the understanding of how subsidy policy interacts with different online channel structures.