Choice of Electronic Waste Recycling Standard Under Recovery Channel Competition

Abstract

Problem definition: We consider two competing electronic waste (e-waste) recovery channels, each of which consists of a collector and a recycler. Collectors obtain donated e-waste and sell the collected items to recyclers or in the secondary market, whereas recyclers process e-waste and sell the recycled material in the commodity market. Each recycler chooses for certification of one of two standards: e-Stewards or Responsible Recycling (R2). E-Stewards requires comparably more responsible handling, thus a higher processing cost, but attracts more e-waste from environmentally conscious donors. Academic/practical relevance: Despite the rapid growth of e-waste, the operations management community still understands little about e-waste processing supply chains. We add to this body of knowledge by capturing three salient features in the e-waste recovery industry: the existence of two recycling standards, the secondary market, and competition both within and between recovery channels. Methodology: We model the problem as a Stackelberg game and characterize the firms’ equilibrium decisions, deriving managerial insights through sensitivity analysis and numerical studies. Results: Competition between recovery channels is a key factor motivating e-Stewards adoption, whereas a recycler always chooses R2 in its absence. Interestingly, when competition exists both within and between recovery channels, recyclers with strong e-waste processing scale economies choose e-Stewards when incurring significantly higher processing costs than with R2. Furthermore, both the total environmental benefit and welfare might be higher when recyclers choose R2. Managerial implications: Policy makers who aim to encourage e-Stewards adoption should (1) lower entry barriers for new recyclers to induce competition, and (2) offer incentive programs to alleviate e-Stewards’ cost disadvantage, though only when recyclers have weak scale economies. Policy makers and nongovernmental organizations, however, should exercise caution in endorsing e-Stewards because R2 actually may generate a higher environmental benefit because of higher recycling volumes.