Strategic introduction of an online recycling channel in the reverse supply chain with a random demand

Abstract Nowadays, the online recycling model becomes increasingly popular. More and more firms are gradually conducting a model with both offline and online recycling channels. Unfortunately, few works in the literature concern about it. Taking the random demand of remanufactured products into consideration, we establish a theoretical model in which the remanufacturer plays as a game leader and the recycler acts as a follower. We study three recycling channel models, namely a single offline recycling channel (Model A), a single online recycling channel (Model B) and mixed recycling channels (Model C). We obtain the optimal pricing and recycling quantities decisions, as well as the corresponding profits. Results show that the mixed recycling channels model can help reduce the transferring price under some conditions and force the recycler to raise the recycling price. As a result, the introduction of an online recycling channel can always benefit the remanufacturer but hurt the recycler. Furthermore, regarding the reverse supply chain system, we uncover that the introduction of an online channel can be beneficial or harmful. In particular, the mixed recycling channels model may be worse off than the single offline recycling channel model under a specific condition.