Recycling channel strategy in the presence of free-riding in the carbon neutrality era.

ABSTRACT

Recycling has become a critical response to the goals of reaching a carbon peak and achieving carbon neutrality. This study explores the effects of consumer free-riding behavior, the quality of recycling services, and the costs of channel transfers on the profitability of manufacturers and retailers in a dual-channel closed-loop supply chain (CLSC), focusing on the importance of recycling practices for carbon neutrality. Using consumer utility theory and a Stackelberg game model, we analyze the dynamics among these factors. Our results show that (i) Consumer free-riding behavior slightly increases market demand and recycling volumes, enhancing profitability for both manufacturers and retailers in the dual-channel CLSC. (ii) The quality of recycling services and the transfer costs associated with retailer free-riding behavior jointly influence the profits of manufacturers and retailers. (iii) The effect of free-riding behavior on recycling services affects both forward sales and reverse recycling channels equally. This study provides valuable insights for decision-making in sustainable development practices in the recycling sector, significantly contributing to the goal of achieving carbon neutrality.