Abstract
In recent years, the concept of sustainability has attracted a great amount of attention, due to increasing energy resources scarceness. Waste recycling is known as an efficient approach to improve sustainability and save energy. In this view, a sustainable supply chain is established in the current study to investigate the effects of waste recycling on sustainable development. The considered supply chain consists of the government, two manufacturers, a supplier, a waste depot, and a recycler. Under this structure, two substitutable products are made of the virgin and recyclable waste materials. The supplier provides the virgin materials for the first product. The waste depot collects the non-recycled waste, whereas the recycler recycles it and supplies the recycled waste for the second product. Also, the government supports the second product to provide an incentive for its members to collect and recycle more waste. Then, the game theory is applied to make decisions under the considered structure. Finally, the results are revealed and some managerial insights are provided. It is derived that the governmental supportive policies play a significant role in resources conservation and energy storage. Moreover, increasing the quality of the product made of the recyclable waste improves the government’s utility.
This is a visual representation of the abstract.
Keywords
Introduction
Motivation
With growing energy resources scarceness, the concept of sustainable development has attracted a significant attention in recent years (Jafari, 2023a; Khan et al., 2023). Environmental, economic and social aspects are known as the fundamental pillars of the sustainable development (Jafari, 2023b; Tanveer et al., 2022). Waste recycling has a considerable effect on the environmental sustainability (Bulach et al., 2018; Dias et al., 2022). It reduces the air pollution and the greenhouse gases emissions as well as conserves the natural resources and the renewable and nonrenewable energies (Fu et al., 2022; Jafari, 2023c; Nketiah et al., 2022). Using the recyclables to manufacture a new product decreases the need for the virgin materials and this saves the natural resources and energy by reducing the need for mining or extracting the virgin materials (Callesen et al., 2022).
Governments play a major role for achieving the sustainable development goals (ElMassah and Mohieldin, 2020; Hassan et al., 2019). In this point of view, providing an incentive for the economic enterprises by implementing some supportive policies like reducing the tax rates or paying a subsidy can be considered as the common approaches in order to reach these goals (Mohammadzadeh et al., 2022; Naserabad et al., 2021).
The current study considers a supply chain structure consisting of the government, two manufacturers, a supplier, a waste depot, and a recycler for manufacturing two substitutable products in a competitive market. One of these products is manufactured from the virgin materials by the first manufacturer, whereas another one is produced using a recyclable waste by the second manufacturer. The supplier provides the virgin materials for the first manufacturer. Moreover, the waste depot collects the required non-recycled waste and then the recycler processes it (including separating, clearing, and washing operations) for the second manufacturer. In addition, the government supports the second product by stimulating the members involved in its supply chain to collect and use more waste. Then, the game-theoretic frameworks are applied in order to make decisions under the considered structure. The game theory is an efficient mathematical approach to analyze the complicated relationships established among some rational agents in order to make their decisions under competitive and cooperative situations (Jafari, 2021; Jafari, 2023d; Jafari, 2024; Jafari and Safarzadeh, 2023; Jafari et al., 2020).
Literature review
The current study aims to establish a supply chain structure where two substitutable products are manufactured using the virgin and waste materials. In this setting, the game-theoretic framework is applied to make decisions. To our knowledge, researches on how to investigate the recycling process under a supply chain structure using the game theory are still limited that most of them have been addressed as follows:
Yi et al. (2016) established a dual-recycling channel in a retailer-oriented closed-loop supply chain. Using the game theory, they implemented a two-period approach in order to set prices in each recycling channel. Li et al. (2019) studied the end-of-life products under a closed-loop supply chain with an option to open the online recycling channel. Xu et al. (2020) considered the capacity constraints in the recycling channels under a closed-loop supply chain including one manufacturer and one retailer, where the manufacturer sells his products to customers and the retailer acts as an interface. Matsui (2022) analyzed the competition established between a recycling company and a general third-party collector under a dual-channel closed-loop supply chain applying the game theory. Yu et al. (2021) used a game model to analyze the competition between the legal and illegal recyclers considering the quality level of the end-of-life vehicles. Moreover, Zhang et al. (2021) studied a closed-loop supply chain by considering the governmental reward-penalty mechanisms.
Guo et al. (2018) provided some directions for the waste recycling companies under a supply chain including one processor and one recycler by considering different scenarios. Jafari et al. (2017) investigated the waste recycling process on a three-echelon supply chain consisting of the collector, recycler, and manufacturer, where a product is manufactured from a recyclable waste. Furthermore, Parsaeifar et al. (2019) developed a game-theoretic model in order to calculate a gap between the green and non-green recyclables under a competitive three-echelon supply chain.
Jafari (2019) considered a supply chain structure including two collectors and three firms, where the collectors collect the plastic and metal bottles and the firms clean and fragment them. Then, the recycled materials are used in textile industry as an appropriate substitutable for cotton. Moreover, Jafari (2022) discussed the economic and environmental perspectives of sustainability under a supply chain structure where the PET plastic bottles are recycled and reused in textile industry.
Liu et al. (2020) discussed the dynamic relations between a waste producer and a recycler in waste recycling process using different market scenarios. Jin et al. (2020) proposed three waste recycling methods including internal recycling in a firm, intrafirm collaborative processing, and centralized processing in an industrial environment by providing a basis for the governmental supportive policies. He and Yuan (2020) analyzed the competitive relationships between the building materials enterprises and the waste recycling companies under a construction waste recycling market. Yang et al. (2021) established a multi-agent waste recycling system including the governments, individuals, and firms in order to find an efficient recycling model for the considered problem. Moreover, Cohen et al. (2021) developed a model for the recycling process by considering the social and economic aspects of sustainability.
Research contributions
In the current study, a novel sustainable supply chain is established in which two substitutable products are manufactured and then sold to customers. One of them is produced using the virgin materials, while another one is procured from a recyclable waste. Under the considered structure, the government provides some supportive policies for motivating the members who produce the second product to collect and utilize more waste. For this reason, the government pays a portion of the collecting, recycling, and producing costs of the second product. Moreover, the game theory is applied in order to make the decisions under different situations established among the members. To our knowledge, this study is the first one that deals with two substitutable products manufactured from the virgin and waste materials by considering the governmental supportive strategies to improve the environmental sustainability.
The remainder of the paper is organized as follows: The research problem is described in Section ‘Problem description’. The game-theoretic models are developed in Section ‘Game-theoretic approach’. In Section ‘A real example’, a real example is provided. Section ‘ Results and discussion’ deals with the results and managerial insights. Ultimately, the conclusions are presented in Section ‘ Summary and conclusions’.
Problem description
Consider two substitutable products where one of them is produced from the virgin materials and another one is made of the waste. Suppose the products 1 and 2 are produced from the virgin and waste materials, respectively. A supplier provides the virgin materials required to produce the product 1. In addition, to produce the product 2, its manufacturer purchases the required recycled materials from a recycler. The recycler also provides the non-recycled waste (waste that the recycling operations like separating, clearing, and washing have not been implemented on it) from a waste depot. As a matter of fact, the waste depot collects the non-recycled waste and then the recycler recycles it. Ultimately, the manufacturer uses the recycled waste (waste obtained after the recycling operations) to produce the product 2.
In the current study, a supply chain is considered consisting of the government, two manufacturers, a supplier, a waste depot, and a recycler. Under the considered supply chain, two substitutable products entitled as the product 1 (made of the virgin materials) and the product 2 (made of the waste materials) are manufactured and then sold to customers. The manufacturers 1 and 2 produce the products 1 and 2, respectively. The supplier provides the required virgin materials for the manufacturer 1. The waste depot collects the non-recycled waste, while the recycler recycles it and purveys the recycled waste to the manufacturer 2. Moreover, to motivate the members involved in the product 2’s supply chain, the government applies some supportive policies. In fact, the government supports the waste depot, recycler, and manufacturer 2 to collect and use more waste materials. In this view, the government undertakes to pay a portion of the producing cost of the product 2 as well as the collecting and recycling costs of its required waste. This leads to decreasing the final price of the product 2 as well as extending its demand. Clearly, the waste required to manufacture the product 2 would increase in this situation.
Under the considered structure, the supplier determines the price of the virgin materials for the manufacturer 1. The waste depot specifies the price of the non-recycled waste for the recycler. The recycler sets the price of the recycled waste for the manufacturer 2. Moreover, the manufacturers 1 and 2 declare the prices of the products 1 and 2 for customers, respectively. Then, based on the prices set for both products and their qualities, the customers’ demands for the products as well as the demands for the virgin and waste materials would be specified.
The notations used in this study are defined as follows:
The demands for the final products, the virgin materials, and the recycled and non-recycled wastes are formulated as follows:
Evidently, the demands of the virgin and waste materials are obtained based on the demands for the final products.
The members’ profits as well as the government’s utility are also formulated as follows:
As mentioned earlier, the government is trying to motivate the members to collect and utilize more waste. Thus, the total amount of the collected waste has been assumed as the government’s utility. The structure of the problem has been depicted in Figure 1.

Structure of the investigated problem.
To ensure that the decisions are made feasibly and rationally, the following constraints are taken into consideration:
In relation (14), the first two constraints ensure that the demands for the final products and the demands for the required materials are non-negative. The next five constraints are incorporated into the problem to allocate non-negative profits to the members. The price of the product 2 must be less than the price of another one. Otherwise, customers will not have an incentive to buy the product 2 with lower quality and higher price. Furthermore, the last constraint guarantees that the price set for the recycled waste is lower than the price of the virgin materials. Otherwise, the manufacturer 2 has no motivation for utilizing the waste to produce his products and therefore he uses the virgin materials with higher quality and lower price, doubtlessly.
Obviously, when the manufacturers sell their products to customers without any profit, the demands faced by them will be non-negative. In fact, in this situation, it is expected that customers are stimulated to purchase both products. According to relation (14), we have:
In the next section, the decisions will be made applying the game-theoretic approach.
Game-theoretic approach
In this section, the members (players) make their decisions using the game-theoretic approach.
Nash game
Nash game refers to a common scenario in which the players have similar decision powers. In this setting, they make their decisions independently and simultaneously. Under the considered problem, this game is formulated as follows:
Now, the members try to determine the decisions by maximizing their own profits, independently and simultaneously. We have:
Profit functions
Functions
According to relation (15), it is easily proved that the obtained prices meet relation (14). Therefore, solution (18) is feasible and generates an equilibrium in Nash game.
Note that the considered demands, the allocated profits, and the government’s utility are also obtained by replacing the calculated prices into relations (1)–(13).
Stackelberg game
Under Stackelberg game, the manufacturers’ decision powers are assumed to be higher than the others. In fact, the manufacturer 1 imposes his decisions on the supplier, whereas the manufacturer 2 imposes his decisions on the waste depot and recycler. In this setting, initially, the manufacturers as the leaders make their decisions independently and simultaneously. Then, the supplier, waste depot, and recycler as the followers determine their prices independently and simultaneously. Stackelberg game model is as follows:
First, based on the manufacturers’ decisions, the other members specify their prices independently and simultaneously.
Regarding relation (17), profit functions
Clearly, functions
Regarding relation (15), the feasibility of solution (21) would be inferable.
Chain-to-chain game
In Chain-to-chain game, the members involved in each supply chain agree to act in union and make their decisions in an integrated manner. As a matter of fact, in this game, the members in each chain determine their decisions by maximizing the total profit of that chain. It can be stated that the decisions are obtained under a competition established between both supply chains. Chain-to-chain game is formulated as follows:
We have:
Obviously,
It is easily proved that solution (24) is feasible and thus it can be considered as the equilibrium under Chain-to-chain game.
However, due to ignoring the intra-chain decisions in Chain-to-chain game, it is not possible to determine the profits assigned to the members. For this reason, it is assumed that the profit of each chain is shared among its members based on their decision powers. In fact, if
where,
Obviously, if the decision powers of the members would be similar, then relation
Eventually, it is adequate to apply relations (6)–(8) in order to set the intra-chain prices
A real example
Consider the disposable plastic cups market where two competing manufacturers produce their products and sell them to customers. The manufacturer 1 uses the virgin materials to produce the product 1, whereas and the manufacturer 2 utilizes the plastic waste to produce the product 2. The manufacturer 1 provides the required virgin plastic from a supplier. Moreover, to manufacture the product 2, initially, a waste depot collects the required waste, and subsequently, a recycler performs the recycling operations on it. Finally, the manufacturer 2 uses the recycled waste to produce this product.
Suppose the supplying cost per ton of the virgin plastic is equal to
The results given by the developed games for the provided real example.
In Stackelberg game, the manufacturers’ decision powers exceed the others. In this setting, the decision power of the manufacturer 1 in comparison to the supplier and the decision power of the manufacturer 2 compared to the waste depot and recycler have been considered to be
Regarding the results provided in Table 1, one can derive that the members’ profits as well as the government’s utilities are equal under Stackelberg and Chain-to-chain games. The manufacturers’ profits in Stackelberg and Chain-to-chain games are higher than in Nash game. This is concluded in reverse for the profits assigned to the supplier, waste depot, and recycler. Also, the government’s utility under Stackelberg and Chain-to-chain models are higher than under Nash model.
Results and discussion
In this section, the results obtained from the developed models will be presented.
Comparisons of the members’ profits and the government’s utility
In this section, the decisions are analyzed under different governmental scenarios as well as the investigated games.
Comparisons under the governmental scenarios
First, the members’ profits and the government’s utility are evaluated under the governmental strategies. For this reason, the following scenarios are considered:
Scenario
Scenario
Managerial insight 1
The governmental supportive policies from the members involved in the product 2’s supply chain lead to a growth in their profits as well as a decline in the members’ profits in the product 1’s supply chain. Also, this motivational policy enhances the customers’ demand for the product 2 as well as the amount of the waste materials needed for its production, which will improve the government’s utility.
It can be stated that by implementing the governmental supportive policy, the producing cost of the product 2 in addition to the collecting and recycling costs of its required waste will be reduced and this results in a decline in its price as well as a rise in its demand. In this situation, the profits allocated to the members who are included in the product 2’s supply chain and the government’s utility will also increase. Moreover, it can be concluded that some customers for product 1 switch to buy product 2 and this leads to decline in demands and the profits gain by the members involved in the product 1’s supply chain.
Comparisons under the developed games
Here, the effects of the considered games are investigated on the decisions. For this purpose, the members’ profits and the government’s utility are compared under Nash, Stackelberg, and Chain-to-chain games.
where, we have:
Managerial insight 2
In a situation in which the decision powers of the manufacturers exceed the others, the cooperation or competition among the members do not affect their profits and the government’s utility.
Managerial insight 3
By considering a dominant decision power for the manufacturers, higher profits would be allocated to them compared to a situation in which all the members own similar decision powers. This inference can be derived in reverse for the supplier, waste depot, and recycler. Furthermore, by considering a threshold condition, when the members have different decision powers, the government’s utility is more than a situation in which they have similar decision powers.
Sensitivity analysis of the members’ profits and the government’s utility
In this section, a sensitivity analysis is implemented in order to determine the effects of the parametric changes on the decisions made by the members.
The effects of changing the quality level of the product 2 in comparison to the product 1 on the decisions are illustrated in Figure 2.

Sensitivity analysis of the quality level of the product 2 compared to the product 1. (a) Changes of the members’ profits in the product 1’s supply chain. (b) Changes of the members’ profits in the product 2’s supply chain. (c) Changes of the government’s utility.
Managerial insight 4
Improving the quality level of the product 2 leads to a decrease in the profits of the members involved in the product 1’s supply chain, an increase in the profits allocated in the product 2’s supply chain, and an improvement in the government’s utility.
The sensitivity analysis of the government’s subsidy rate paid to the members included in the product 2’s supply chain is demonstrated in Figure 3.

Sensitivity analysis of the government’s subsidy rate paid to the members in the product 2’s supply chain. (a) Changes of the members’ profits in the product 1’s supply chain. (b) Changes of the members’ profits in the product 2’s supply chain. (c) Changes of the government’s utility.
Managerial insight 5
By supporting the members included in the product 2’s supply chain, their profits and the government’s utility improve, whereas the members’ profits in the product 1’s supply chain worsen.
In the following, the effects of changing the self-price and cross-price elasticities of the customers’ demands are investigated on the decisions. The analysis is depicted in Figure 4.

Sensitivity analysis of the price elasticities of the customers’ demands. (a) Changes of the members’ profits in the product 1’s supply chain. (b) Changes of the members’ profits in the product 2’s supply chain. (c) Changes of the government’s utility.
Managerial insight 6
Decreasing the self-price elasticity as well as increasing the cross-price elasticity of the customers’ demands improve the members’ profits and the government’s utility.
Ultimately, the effects of changing the elasticities of the demands with respect to the quality level of the product 2 are analyzed. These changes are shown in Figure 5.

Sensitivity analysis of the elasticities of the demands with regard to the quality level of the product 2. (a) Changes of the members’ profits in the product 1’s supply chain. (b) Changes of the members’ profits in the product 2’s supply chain. (c) Changes of the government’s utility.
Managerial insight 7
Considering the quality level of the product 2, less the elasticity of the demand for the product 1 as well as more the elasticity of the demand for the product 2 improve the members’ profits and the government’s utility.
Summary and conclusions
In this study, the effects of the waste recycling were investigated on the sustainable development and the energy storage concepts. For this reason, a supply chain including the government, two manufacturers, a supplier, a waste depot, and a recycler was considered where two substitutable products are manufactured and delivered to customers. The manufacturers 1 and 2 produce the products 1 and 2 using the virgin and waste materials, respectively. The supplier procures the virgin materials for the manufacturer 1. The waste depot collects the waste and the recycler recycles it for the manufacturer 2. Furthermore, the government applies some supportive policies for motivating the members included in the product 2’s supply chain to collect and utilize more waste.
Then, the game theory was applied to make the decisions under the considered problem. In this setting, the game-theoretic models including Nash, Stackelberg, and Chain-to-chain were developed under various situations established among the members. In Nash game, the members have the same decision powers and they determine their decisions independently and simultaneously. Under Stackelberg game, the manufacturers have dominant decision powers over the others. Moreover, in Chain-to-chain game, the members included to manufacture each product agree to make their decisions in an integrated manner.
Subsequently, the models were investigated and some managerial insights were revealed. The main results indicate that supporting the members involved in the product 2’s supply chain leads to a growth in their profits and a decline in the profits allocated to the others. This motivational policy would also improve the government’s utility. Moreover, when the manufacturers have higher decision powers than the others, competition or cooperation established among the members do not affect their profits and the government’s utility.
Eventually, a sensitivity analysis was done to determine the effects of changing the considered parameters on the members’ profits and the government’s utility.
Some possible suggestions for future studies are: In this research, the government’s subsidy rate was considered as a constant value. In future studies, it can be specified as the government’s decision variable. Other motivational policies like the tax reduction can be taken into account to provide an incentive for the members. In this study, a linear and deterministic function was considered to determine the customers’ demands. A nonlinear or stochastic demand function can be used in future researches.
Footnotes
Correction (Dec 2025):
Online article updated to correct affiliation of S Safarzadeh to Department of Industrial Engineering.
Declaration of conflicting interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
