Strategic Remanufacturing under Competition

Abstract

We investigate firms’ remanufacturing strategies for the case of a duopoly. On the one hand, remanufactured products cannibalize sales of new products of the same firm thereby hurting its profits. On the other hand, they can be part of a profitable marketing strategy that targets different customer preferences by providing a larger number of alternatives to customers. This paper studies the tradeoff between these effects and how it is influenced by competition. We develop a model where demand functions for new and remanufactured products of each firm are derived from utility maximization by a representative consumer. This allows us to capture preference and substitution effects between all offered products in the market. We discuss how equilibrium strategies are affected by factors such as competition, substitutability, production cost as well as remanufacturing cost. For example, when competitive intensity between new and new products, and remanufactured and remanufactured products, is (high), both (neither) firms offer remanufactured products in a symmetric equilibrium. If substitution between new and remanufactured products of the same firm is low, but the remanufactured product has a lower margin than the new product, firms can be worse off from remanufacturing.

Pricing and coordination of competitive recycling and remanufacturing supply chain considering the quality of recycled products

“…Yao and Teng [39] found that the growing competition among manufacturers is good for increasing both the sales of new products and the recycling of used products. Ma et al [21] analyzed the remanufacturing strategy of duopoly enterprises, and the influence factors on the equilibrium strategy are discussed including the competition, the substitution, the production cost, and the remanufacturing cost. In [33], the competition between a supplier and a recycler has more pricing power than a manufacturer with limited production capacity.…”