Leveraging E‐Waste Recycling via Auctions With Dual Responsibilities

ABSTRACT The efficient recycling of electric and electronic waste products (e‐waste) not only provides environmental and societal benefits but also is recognized as being profitable from economic and business perspectives. However, how to design incentive mechanisms for efficient e‐waste recycling with dual responsibilities, namely, corporate social responsibility (CSR) and government rural vitalization, remains unclear. In this paper, we consider an e‐waste recycling problem in which a company collects a certain amount of e‐waste from developed and poor regions. With the goal of CSR, the company reserves a portion of demands for the poor region while realizing as much social welfare as possible. In pursuit of the rural revitalization strategy, the government offers subsidies to agents from the poor region. We introduce the concept of the price of CSR , which is defined as the loss of social welfare. We find the price of CSR is nondecreasing when the demand in the poor region increases. We propose a family of novel Vickrey‐Clarke‐Groves (VCG) auctions with CSR and government subsidies, which are all incentive‐compatible (IC) and individual‐rational (IR). Two strategies are considered for allocating government subsidies, namely, agent subsidy policy and company subsidy policy. Interestingly, if the bid‐ask spread is large enough in the developed region, then the company with CSR obtains higher profits. The outcome of e‐waste recycling is used as a signal for the precise allocation of the budget for government subsidies. The agent subsidy policy can ensure that a “poorer” agent or village receives a higher subsidy. When the company exhibits a low level of CSR, the company subsidy policy can bring more benefits for agents in the poor region at a relatively lower overall subsidy than the agent subsidy policy. This paper enriches the existing auction theory and provides insights into the impacts of firm‐level action (CSR), government policy (subsidies), and individual behavior on rural vitalization.