877. An options contract for WEEE reverse supply chains
Invited abstract in session MB-42: Game theory for the circular economy, stream Circular & Sustainable Supply Chains.
Monday, 10:30-12:00Room: Newlyn GR.02
Authors (first author is the speaker)
| 1. | Jenny Andris
|
| Institute of Management and Economics, Clausthal University of Technology | |
| 2. | Christoph Schwindt
|
| Institute of Management and Economics, Clausthal University of Technology |
Abstract
The increasing number of electrical appliances on the market is contributing to a growing amount of waste from electrical and electronic equipment (WEEE). The European Union's WEEE directive stipulates that manufacturers are responsible for proper WEEE collection and disposal. In this talk, we focus on long-term contracting between a manufacturer and a collector in a reverse supply chain for WEEE. We propose a wholesale contract that serves as a benchmark for our research. Starting from a previously designed options contract with a collector as the Stackelberg leader and a manufacturer as the follower, we swap the roles of leader and follower and consider a new Stackelberg game. The options contract protects the collector’s investment in capacity extension against the risk incurred by uncertain future order volumes. On the other hand, the financial risk of the manufacturer associated with the options investment can be limited to a given value at risk. We show that the wholesale contract inevitably fails to coordinate the supply chain, whereas the new options contract is proved to minimize the total supply chain cost under economically plausible conditions. In a computational experiment we compare the performance of the manufacturer’s optimal options contract with the results obtained by using a wholesale contract.
Keywords
- Supply Chain Management
- Game Theory
Status: accepted
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