Optimal contract design of reverse supply chain considering uncertain recycle price

Considering Chinese unique national condition for rapidly developing country, the main recycle model of reverse supply chain include two types, which are the flow of individual commerce wandering about the streets and their family workshop recycle patterns. Some moral hazard problem appears in this market, because of uncertain recycle price. Manufacturer has more information about recycle price, and provides the corresponding recycling price through evaluating the waster quality and forcing down the waster prices, so the recycler is imperfective information. The paper analyzes the optimal contract design for Chinese adverse supply chain considering the uncertain recycle price. At first, the business profit functions of manufacturer, retailer and recycler are supposed under the balanced wholesale prices and retail price. Secondly, the paper constructs the optimal contract model of reverse supply chain under the uncertain recycling price, and then gets the optimal recycling schemes under certain theoretical restricted condition. Lastly, the paper proposes measures to overcome the moral hazard problem of reverse supply chain because of fluctuating recycle price.