Several environmental regulations are announced due to high demands in many raw material markets and growing concerns about the environmental impacts of disposal.
In the light of management and recycling of e-scrap products, the EPA imposes taxes on MIS firms to restrain excessive production of new products and produce environmental friendly products, and compensate recycling firms for the costs along with recycling and processing the e-scrap products to encourage recycling programs.
This thesis presents the Stackelberg-type model, which is the social welfare model. The EPA is a leader to determine the level of the ARFs and subsidy fees to maximize the social welfare. The MIS firms and recycling firms are followers, who choose the optimal production quantity of new products and the optimal reward money after observing the level of fees announced by the EPA. We assume that there is a competitive market in closed-loop supply chains; that is, there are many MIS firms and recycling firms in the consuming market and recycling market respectively. Currently, the EPA determines the level of the ARFs and subsidy fees on the basis of fund balance between the total tax revenue and total subsidy expenditure. For comparative purposes, we also develop the fund balance model where the total tax revenue is equal to the total subsidy expenditure. Then we examine the numerical study to illustrate the use of the social welfare model and the fund balance model. Besides, we do sensitivity analysis to illustrate possible trends.
Furthermore, we assume that recycling firms are homogeneous. We study how the EPA determine the optimal number of recycling licenses in the recycling market
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to maximize the social welfare and study the impact of the number of recycling licenses on the value of social welfare, total recycling quantity, reward money, and subsidy fees.
We summarize our results as follows:
(i) The proposed social welfare model outperforms the fund balance model considering the value of social welfare in a competitive system.
(ii) The difference in the value of social welfare between the social welfare model and the fund balance model is big when one of the following conditions holds: the market price is high, the environmental externality cost is high, or the influence between the recycling firms is big. That is, the improvement in the value of social welfare is great when one of the three conditions mentioned above holds.
(iii) The level of ARFs is the same in the social welfare model and the fund balance model. The level of subsidy fees is lower in the social welfare model than the level of subsidy fees in the fund balance model.
(iv) The optimal production quantity of the MIS firms is the same in the social welfare model and the fund balance model. The reward money of the recycling firms is lower in the social welfare model than the reward money of the recycling firms in the fund balance model.
(v) Considering the value of social welfare, the EPA may approve as many as applications for recycling licenses in the social welfare model, but may not approve many applications for recycling licenses in the fund balance model.
In this thesis, we assume that recycling firms exist in distinct market areas and there is only one recycling firm in a market area. It would be interesting to
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investigate another situation where all recycling firms exist in a recycling market.
On the other hand, we only assume that the intercept parameter decreases as the number of recycling licenses increases when we study the number of recycling licenses. However, other parameters, such as the influence between the recycling firms, may increase or decrease as the number of recycling licenses increases. It would be more realistic to consider the change of other parameters as the number of recycling licenses increases.
In this thesis, we describe the demand function and the recycling quantity function as linear functions. It would be interesting to develop a model where the demand function and recycling quantity function of different products are different.
In addition, there is only one period in this thesis; moreover, we do not consider the issues of inventory and constraints on productivity. It would be more realistic to consider the issues of inventory or constraints on productivity, and then develop a suitable model for studying the recycling system over many periods.
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