Government’s Regulation And Reverse Supply Chain Incentive Mechanism Based On EPR Instrument

The development of technology and modern industry results in the implementation of resource recycling which becomes a vital strategic initiatives of sustainable socio-economic development. Recycling of end of life (EOL) products and fulfilling the extended producer responsibility (EPR) system for the corporation can effectively promote environmental protection, increase resource utilization rate and cost savings, which enhance a company’s competitive advantage and achieve the sustainable development of enterprises. At present, the government and enterprises have a hard time implementing the reverse supply chain (RSC) system effectively because consumer’s lack of environmental protection consciousness in our country, the EOL products recycling market disorder exists universally, and the motivation of recycling and remanufacturing of products of the enterprises is low. Therefore, designing reasonable and effective incentive mechanism to supervise and manage enterprises is very important. Given this, the paper based on the EPR system, game theory and incentive theory which are applied to study the coordination mechanism between the government and the RSC system, aiming to give guidances of the design of the government and the RSC members. The main research contents and conclusions are summarized as follows.(1) The initiative of participating in salvage of waste material and remanufacturing within the RSC can promote the sustainable development of the RSC effectively. For a RSC system with both moral hazard and adverse selection, the design process of the government and the manufacturer’s linear contracts was studied under symmetric information and asymmetric information with game theory and incentive theory. The influence of various incentive factors on the contracts were analyzed as well. The impact between the expected profits of the government, manufacturer, recycler and various parameters were discussed by numerical simulation. The research indicates that, the proposed contract was designed by principal can effectively identify the information of the agent and promote enterprises’ level, improving the government and enterprises’ expected revenue. The conclusions in the paper are significant to the practical operation of RSC system under the EPR system.(2) Based on The RSC system which operated under the EPR instrument included a manufacturer and a recycler, a bilevel programming model between the government and the supply chain system was established. The incentive contract between the manufacturer and the recycler was designed to explore the optimal decisions of the supply chain members. The optimal fiscal policy of the government was analyzed, and the effects of various parameters of the government and the participating enterprises were discussed. The study indicates that, implementation of the government’s environmental regulation is effective to improve the remanufacturer’s reproductive rate, as well as to improve the treatment of agency’s effort-extent and the social welfare, and sequentially to ensure the effective implementation of the EPR instrument.The development of the RSC system under EPR system is help to improving resource recycling, promoting the sustainable development of venous industry, and fulfilling the maximization of economic and environmental efficiency. Accordingly, designing effective incentive mechanism to motivate enterprises to improve recovery and remanufacture ability has the extremely important significance.