Recycling investment strategies in two‐sided competition with diverse vertical structures

Abstract

The supply chain consisting of an original equipment manufacturer (OEM) and a downstream retailer encounters vertical competition along with two‐sided competition from a third party remanufacturer (3PR). The two‐sided competition refers to competition in both recycling and sales. We investigate the recycling investments by the OEM and retailer in diverse vertical structures. Our findings indicate that cooperative investment is optimal when either the OEM or retailer is the Stackelberg leader, but neither party is willing to invest in recycling when they are in vertical Nash. The experiments reveal that the OEM, acting as the Stackelberg leader, and implementing the cooperative investment strategy, yields better economic and environmental benefits.