128 / 2024-04-21 13:32:26

The Value of Conversion and Information in Waste Chains

waste conversion, information asymmetry, waste chain management

Our study delves into the optimal operational strategies within a decentralized waste supply chain, where the upstream manufacturer generates waste. Then, this waste can either be sold to a downstream manufacturer, or the upstream manufacturer can pay a fee for the downstream manufacturer to convert it into a valuable product. Our investigation reveals that both a relatively small and a relatively large waste conversion rate confer higher bargaining power to the upstream manufacturer. In such scenarios, the upstream manufacturer can set a higher selling price for the waste. Conversely, a median conversion rate results in diminished bargaining power for the upstream manufacturer, necessitating the payment of disposal costs to the downstream manufacturer (i.e., an accommodating policy). Furthermore, we identify specific conditions under which both manufacturers can make zero profit associated with their own productions, respectively. Our analysis distinguishes the traditional dual sourcing problem by examining the endogenous intermediate price of waste, cost dynamics, and stochastic conversion rate in waste chains.