Study of Competitive Manufacturers’ Recycling Decisions Considering Cross-Shareholding and Capital Recovery Constraint

Abstract

Entrusting a third party and trade-in are the two main ways for manufacturers to recycle. This paper analyzes the conditions of M 1 ’s third-party recovery and M 2 ’s trade-in coexistence and studies the influence of manufacturers’ innovation ability, horizontal cross-shareholding, and recyclers’ financing on recycling decisions and profits by establishing two closed-loop supply chain competition game models with different recovery methods. The study found that if M 1 ’s old consumers are low-quality, it should adopt the partial recovery strategy when the residual value is small. However, when the residual value is large, it should adopt the full recycling strategy. The increase in the manufacturers’ cross-shareholding shares leads to an increase in their own profits and a decrease in their partners’ profits. Under different circumstances, factoring financing and equity financing can both offset the side effects of partial cross-shareholding on manufacturers’ profits. When old consumers are low-quality, equity financing is better than factoring financing under the partial recovery strategy. Under the full recovery strategy, however, factoring financing is better than equity financing. When old consumers are high-quality, the advantages and disadvantages of equity financing and factoring financing depend on innovation input, financing rate, and equity number.

Keywords: Trade-in, Cross-shareholding, Capital recovery constraint, Recycling decisions, Closed loop supply chain.