Chapter 2: The Impact of the Government Subsidy on Product Recycling

Under the pressure of resource shortage, product recycling has become an important social issue. Facing the environmental awareness enhancement of consumers and the recycling effort of the supply members, it is important for the government to issue appropriate policies to promote product recycling. To help the government to make policy options, we explore the impact of three subsidy policies on the product recycling of the green closed-loop supply chain (GCLSC). We model three manufacturer-led Stackelberg game models, and obtain the product recyclability, recycling flexibility, market demand, and recycling quantity under three kinds of subsidy policies (no subsidy, subsidy for product recyclability and subsidy for recycling flexibility). By comparing the optimal policy choice under different objects and the advantages and disadvantages of the subsidy policy, three main findings are obtained as follows: (1) When the government subsidizes the product recyclability, not only the recycling quantity increases directly and the recycling flexibility increases directly, but also the market demand for green products expands. (2) Government subsidies for product recycling do not always promote the recycling rate of the products. When the impact of government subsidies on the product selling is higher, subsidies may bring about lower recycling rate and cause resource waste subsequently. (3) Subsidizing for recycling flexibility can always improve the level of the product recycling.