Alliance or cost-sharing? Recycling cooperation mode selection in a closed-loop supply chain

Given the growth in consumers' environmental awareness, firms are increasingly concerned with used product reuse and remanufacturing. In this paper, we investigate two recycling cooperation modes: recycling alliance mode and cost sharing mode. We develop an analytical approach for determining whether and how the manufacturer and retailer in a closed-loop supply chain (CLSC) should enter a recycling cooperation agreement, and uncover that the optimal recycling cooperation option relies on two key factors: the remanufacturing efficiency and the relative recycling cost efficiency of the manufacturer and retailer. Our analysis shows that, (1) the non-cooperation mode would not be the dominant strategy for the manufacturer and the retailer, while recycling cooperation can be effective in increasing the total collection quantity. (2) The recycling alliance mode benefits the manufacturer when the remanufacturing efficiency is relatively low; while the optimal choice shifts to the cost-sharing mode as the remanufacturing efficiency increases. (3) The retailer prefers the cost-sharing mode in most cases, while would choose the recycling alliance mode only when both the remanufacturing efficiency and the relative recycling cost efficiency are sufficiently low. (4) The two recycling cooperation modes can secure a Pareto improvement for the manufacturer and retailer under certain conditions.