Agency or reselling: Optimal return policy in e-commerce retail systems under cap-and-trade regulation

In recent years, the government has issued regulations on environmental protection, carbon emissions, and trading. Enterprises' environmental awareness has increased, and the operational strategies of manufacturers and platforms have also been affected by environmental regulations. This study considers the interactive effects of agency and reselling contracts between manufacturers and platforms and the cap-and-trade regulation on return policy. Our findings reveal that government-imposed caps on total carbon emissions consistently influence optimal pricing and profits under cap-and-trade regulation, regardless of the presence of a return policy. Additionally, the emission intensity of manufacturers plays a pivotal role in determining the return policy. High manufacturer emission intensity leads decision-makers to provide return services only under specific conditions. Moreover, manufacturers opt for agency contracts when faced with low commission rates, and this threshold is intricately linked to carbon emission intensity, the cap, and the return rate. The government's ability to adjust the cap enables control over changes in manufacturers' profits and output, thereby influencing industrial structure and carbon emissions. Manufacturers strategically choose return policies, considering factors such as carbon intensity, return rate, and commission rate. Remarkably, even under cap-and-trade regulations, manufacturers remain inclined to offer returns under optimal conditions.