Trade-in Strategy and Competition between Two Independent Remanufacturers

Trade-in strategy is a common mode of promotion for firms taking part in the circular economy because it encourages consumers to buy remanufactured products, via a “trade-old-for-remanufactured” framework. This paper studies trade-in strategy by developing game models for a closed-loop supply chain with one manufacturer and two independent remanufacturers. The former is responsible for producing and selling new products and the latter two compete with each other for the collection of used products and the sales of remanufactured products. Unlike the extant literature, this paper focuses on the competition between two independent remanufacturers (IRs) and studies on how holder segment (whether or not to own used products) and competition affects the trade-in strategy. It finds that the proportion of holders on the remanufactured product prices of the IR1 and IR2 have a negative correlation. Conversely, the impact of the proportion of holders on the IR1’s and IR2’s demands (and on their profits) is the opposite. The trade-in strategy generates more benefits for the IR1 only when the proportion of holders is sufficiently high. In addition, when consumers experience a greater difference in durability between remanufactured products and original new products, trade-in strategy is more welcomed by consumers, which in turn, generates more benefits for the IR1.