Strategic and operational decisions under sales competition and collection competition for end-of-use products in remanufacturing

Providing incentives to customers for recycling their end-of-use products is a commonly adopted strategy by remanufacturers for achieving economic scale of remanufacturing. However, the entrance of remanufacturers threaten the sales of new products that are produced by original equipment manufacturers (OEMs). Thus, OEMs may also take back end-of-use products by providing incentives to restrict the capacities of remanufacturers. Consequently, OEMs and remanufacturers compete not only on prices in sales market but also on incentives in recycle market. Therefore, we formulate a closed-loop supply chain model consisting of an OEM and a remanufacturer to investigate their equilibrium prices and incentives. Moreover, we consider that the remanufacturer can strategically focus the economies of scale on the sales market or on the recycle market. We derive the equilibrium decisions and profits under each of the remanufacturer׳s strategies, and identify the characteristics of these equilibrium results. We further derive the conditions to determine the firms׳ behaviors toward the competition. We also find that the higher competitiveness in the sales market will encourage the remanufacturer to focus the economic scale on the recycle market instead of the sales market, which is also beneficial to the OEM.