Optimal operations of a closed-loop supply chain under a dual regulation

Implementations of a deposit-refund policy for waste electrical and electronic equipment (WEEE) have engendered significant economic and environmental benefits. This deposit-refund policy typically charges disposal fees (deposits) for producing new products and offers subsidies (refunds) for recycling used products. However, as the collected disposal fees are insufficient to cover disbursed recycling subsidies, the WEEE recycling industry faces increasing challenges. To address this issue, we introduce a dual regulation regime characterized by the deposit-refund policy and a minimal collection rate of used products. We establish a two-echelon closed-loop supply chain (CLSC) consisting of a brand owner and an original equipment manufacturer (OEM) under the dual regulation. We examine the impact of the dual regulation on four key aspects of the supply chain operations: the brand owner's collection strategy, the OEM's remanufacturing choice, the profits of the two members, and environmental performance. We then investigate how the government optimizes the levels of the unit subsidy and disposal fee by minimizing the deposit-refund policy deficit. Analytical results show that the brand owner's collection strategy and the OEM's remanufacturing strategy are closely related to the dual regulation regime. When the unit disposal fee increases, both members' profits suffer. While the brand owner benefits from a rising unit subsidy, its impact on the OEM's profit is contingent upon the collection and remanufacturing strategies. A stricter minimal collection rate regulation generally hurts the two members when it is an active constraint. The deposit-refund policy's impact on the environment depends on the collection and remanufacturing strategies and the unit environmental benefit of collection. Regulating the minimal collection rate is beneficial to the environment and helps to reduce the deposit-refund policy deficit under certain conditions.