Stabilizing cooperation in e-waste recycling with collective extended producer responsibility: an inverse optimization approach

Extended producer responsibility (EPR) has been widely implemented to address the challenges of e-waste recycling. In collective EPR systems, where producers cooperate as a coalition to share recycling technologies, two critical problems arise: insufficient incentives for product design improvements that enhance recyclability, and instability within producer coalitions. Previous studies have identified a tradeoff between the two under conventional cost allocation mechanisms. This paper proposes an inverse optimization approach to develop a novel cost allocation mechanism that addresses these two issues simultaneously. We further refine the concept of coalitional stability by distinguishing its weak and strong forms. Our analysis demonstrates that the proposed cost allocation mechanism ensures coalitional stability in collective EPR systems, with strong stability achieved under certain conditions. Numerical results indicate that our approach consistently guarantees strong coalitional stability and significantly enhances incentives for improved product design across all scenarios examined.