Determining a subsidy rate for Taiwan's recycling glass industry: an application of bi-level programming

Shih H-S, Cheng C-B, Wen U-P, Huang Y-C and Peng M-Y
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Shih H-S: Graduate Institute of Management Sciences, Tamkang University, Taipei, Taiwan
Cheng C-B: Tamkang University, Taipei, Taiwan
Wen U-P: National Tsing Hua University, Hsinchu, Taiwan
Huang Y-C: National Tsing Hua University, Hsinchu, Taiwan
Peng M-Y: Graduate Institute of Management Sciences, Tamkang University, Taipei, Taiwan

Journal of the Operational Research Society, 2012, vol. 63, issue 1, 28-37

Abstract: This study attempts to optimize the operations of the Recycling Fund Management Board (RFMB), founded by the Environmental Protection Administration of the R.O.C. Government (on Taiwan), through the decision of a subsidy rate for the domestic glass recycling industry. The hierarchical and interactive nature between the two parties is modelled by bi-level programming, where the RFMB plays the upper-level decision unit while the recycling industry is the lower-level counterpart. In order to solve the problem by optimization software, the bi-level formulation is transformed to a single-level problem via Karush-Kuhn-Tucker optimality conditions and is further transformed to a 0−1 mixed integer programming problem by variable substitution. The problem is solved with real-world data, and the obtained solutions are analysed and compared with the RFMB’s current operations. The results suggest that the proposed approach can improve the operations of the RFMB.

Date: 2012
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