Pricing strategies for end-of-life vehicle regarding reward-penalty mechanism and customers’ environmental awareness

Abstract

Governments are paying more attention to end-of-life vehicle (ELV) recycling since it is closely related to the circular economy and sustainability development. Considering the reward-penalty-mechanism (RPM) and customers’ environmental awareness (CEA), this study discusses the optimal recycling price, collection effort level of the ELVs, dismantling level of available parts and RPM intensity in a two-echelon supply chain consisting of a take back center (TBC), a dismantling center (DC) and the government. First, two models, Stackelberg and Collusion behaviour models, are constructed by using of game theory and the optimal decisions are obtained. Furthermore, optimal solutions are compared and some propositions are proposed. Finally, a numerical example is illustrated to study the effects of some parameters including CEA fluctuation, sale price of the scrapped parts and carbon emission savings. The results show that CEA fluctuation is always positive for collection efforts and recycling quantity. A higher CEA fluctuation alleviates the regulatory pressures and helps the government reduce regulation costs. A higher sale price of the scrapped parts helps the TBC achieve higher recycling scales. Carbon-emission-savings and CEA are key points in deciding the intensity and form of RPM. The optimal decisions are more sensitive to the change of parameters under the Collusion behaviour model. Based on the findings, the government should take measures to enhance the level of CEA and provide enterprises policy support to enhance the efficiency and effectiveness of ELV recycling. DCs should invest in dismantling technology and achieve breakthroughs. TBCs should take measures to appeal to more consumers to participate in ELV recycling. It is better for TBCs and DCs to cooperate to achieve an overall win-win situation.