Reverse channel design with a dominant retailer and upstream competition in emerging markets: Retailer- or manufacturer- collection?

By considering different regulations on retailers’ recycle responsibly (the retailers in emerging markets are “encouraged” to collect used products while those in developed markets are “required” to do so), we study a dominant retailer’s collection decision under upstream competition. The equilibrium collection model and effort are derived under different regulations. We find that the lenient regulation in the emerging markets is more likely to induce a socially inefficient equilibrium, and the strict regulation in the developed market induces a socially efficient equilibrium. The results suggest that the policymaker should motive the retailer to undertake more collection responsibility when the intensity of upstream competition is not too low.