Optimal decisions and coordination of a supply chain in the hybrid recycling mode with traceability and fairness concern

Considering the case of recycling competition between a manufacturer and a retailer, we construct game models under centralised and decentralised decision-making with or without fairness concern, respectively. By comparatively analysing the optimal decisions and profits under the three models, we design an improved two-part tariff contract to realise supply chain coordination. We have the following findings: First, in the supply chain with traceability, consumers’ preference for traceability and the impact of traceability on recycling are not only beneficial to the environment but also to each enterprise. Second, the retailer’s concern for fairness can harm the profits of the manufacturer and system. Moreover, the retailer’s disproportionate focus on fairness of the distribution of revenues hinders the introduction and development of the traceability system, leading to lower recycling volume and demand. Third, the traceability system is most efficient under centralised decision-making, attaining the highest traceability level, recycling volume, and system profit. The retail price and manufacturer’s recycling price are lower than those under decentralised decision-making. Our findings also suggest that improved two-part tariff contract can enhance the chain members’ performance. While fairness concern and fierce recycling competition hinder implementation of the coordination mechanism, and improved traceability facilitates the attainment of coordination.