Retail–collection network design under deposit–refund

Retail–collection network design under deposit–refund

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Article ID: iaor20073175
Country: United Kingdom
Volume: 34
Issue: 2
Start Page Number: 324
End Page Number: 345
Publication Date: Feb 2007
Journal: Computers and Operations Research
Authors: , ,
Keywords: networks
Abstract:

This paper studies the interplay between industrial firms and government concerning the collection of used products from households. The focus is on the use of a deposit–refund requirement by the government when the collection rate voluntarily achieved by the firms is deemed insufficient. We present a continuous modeling framework for designing a drop-off facility network and determining the sales price that maximizes the firm's profit under a given deposit–refund. The customers' preferences with regards to purchasing and returning the product are incorporated via a discrete choice model with stochastic utilities. Through parametric analyses, we determine the net value that can be recovered from a returned product as a key driver for the firm to voluntarily engage in collection. We show that a minimum deposit–refund requirement would not achieve high collection rates for products with low return value and point out two complementary policy tools that can be used by the government.

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