Reverse channel selection decisions with a joint third-party recycler

In recent years, Internet-based firms have been increasingly engaged in recycling used products, taking advantage of economies of scale by serving a number of manufacturers. However, most studies on the recycling channel of remanufacturing to date only consider the case of a single manufacturer in a closed-loop supply chain. To address this gap, we develop a Stackelberg game model and show that the joint third-party (J3P) collection mode serving multiple manufacturers may outperform individual retailer- and manufacturer-managed modes, as opposed to existing findings considering a single manufacturer. It is optimal for manufacturers to authorise a large-scale J3P to collect used products. In addition, we show that the J3P can design a two-part tariff contract for the manufacturers to overcome the double marginalisation and collective action problems in decentralised supply chains. Our results provide guidance for enterprises and the government on recycling decisions in the era of a network economy.