Competing recycling platforms’ compatible strategy considering sorted policy

Abstract As large‐scale recycling platforms (LRPs) increasingly enable small‐scale recycling platforms (SRPs) to integrate into their recycling platforms, this embedding mechanism transforms their competitive relationship into one of co‐opetition. In this study, we explore the problem of compatible strategy considering an LRP with awareness and valuation advantages and an SRP. In the compatible case, customers can return their used products directly to LRP through its recycling platform or to SRP through either LRP’ s compatible channel or SRP's own platform. Additionally, numerous recycling platforms have been adopting a sorted policy to enhance their profitability. Our major research findings are as follows: First, due to complex relationships in co‐opetition case, increasing awareness advantage may have negative impacts on LRP's profit. Second, while the recycling platforms’ equilibrium strategies under unsorted recycling are always the same, under sorted recycling, they differ when the valuation advantage falls within an intermediate range. Third, under sorted recycling, despite its valuation disadvantage, SRP's profit may exceed LRP's when the unit reuse profit of recycled products is high. Finally, regardless of sorted recycling, while social welfare always benefits from the compatible channel, consumer surplus consistently deteriorates. Our findings not only provide important implications for recycling platforms to implement compatible strategies to achieve win–win outcomes but also suggest that governments should adopt a balanced approach in regulating recycling platforms under sorted recycling initiatives.