Abstract: At present, most of China's waste electrical and electronic equipment (WEEE) flows into the informal recycling channel without disassembling qualification, which exerts a big competitive effect on the formal channel with disassembling qualification. Faced with the serious e-waste problem, how to support formal channel and promote the regulated WEEE recycling has become a major concern for China. In the current literature, there is a lack of research on the impact of subsidy and market cooperation on the formal channel, based on the recycling competition between formal and informal channels. This paper aims to study the role of government subsidy and market cooperation in supporting the formal channel. On the one hand, the formal channel can be provided dismantling subsidy by the China Recycling Fund. On the other hand, the different disposal methods are examined between the two channels and the market mechanism in which the formal channel cooperates with a remanufactureris introduced. As such the formal channel can sell the high-quality old products to the remanufacturer for remanufacturing. The recycling competition between formal and informal channels is firstly studied, and a game model with quality-based acquisition pricing is established. Based on the different disposal methods between two channels, three competition scenarios are set and the equilibrium solutions are solved respectively. The acquisition pricing of the two channels in different quality levels of old products and the pricing decision of the remanufacturer in the transfer of old products are examined. The influence of subsidy on recycling competition is discussed, and the role of market cooperation in improving the competitiveness of formal channel is analyzed. Furthermore, the changes of acquisition prices are a numerically simulated at different quality levels of old products in three scenarios. Based on the recycling practices in China, the recycling industry corresponding to each scenario of the model is analyzed. The results show that fund subsidy can effectively improve the competitiveness of the formal channel. When the subsidy is not very high, market cooperation can play an important supporting role to the formal channel. The demarcation point in the roles of fund subsidy and market cooperation depends on the relative value of subsidy level and the transfer price of old products for remanufacturing. When remanufactured products are more popular in the market, the transfer price provided by the remanufacturer will be higher, which can help the formal channel enhance its competitiveness in the product acquisition. Our paper provides a modeling framework for the following research based on the competition between formal and informal channels and has practical significance in promoting the regulated development of recycling industry in China.

Key words: waste electrical and electronic equipment (WEEE), informal channel, formal channel, recycling competition, fund subsidy, market cooperation