Product Design and Recycling Operations Strategy Considering Recyclability

Abstract

This study investigates the interaction between product recyclability, corporate profits, and consumer behavior. Based on previous studies on environmental economics and product design, we derive an optimal recycling strategy by analyzing the impact of product design's recycling rate on operations, environment, and profit. Through a model that reflects consumer preference for environmentally friendly products, we investigate the impact of a manufacturing firm’s choice of recycling level, product sales price, and collection strategy for used products on the firm's profit as well as recycling performance. Through the analysis, we reveal that an increase in the recyclability of a product leads to an increase in product price, collection price, consumer demand, and collection quantity. This study contributes to the extant literature in that it enhances understanding of the recycling process and derives its optimal structure and strategy. Additionally, the results of this study provide useful insights for firms to fulfill their environmental responsibilities through product recycling and build a sustainable business capability. This study is significant in that it proposes a method of establishing a product pricing policy by considering consumers' sensitivity to product price and collection price, and establishing an effective and efficient recycling strategy by considering recycling and production costs.