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Market entrance and pricing strategies for a capital-constrained remanufacturing supply chain: effects of equity and bank financing on circular economy

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  • Yanyan Zheng
  • Yingxue Zhao
  • Xiaoge Meng

Abstract

This paper examines market entrance and pricing strategies for a remanufacturer with capital constraint and competition from an original equipment manufacturer. In the study, the remanufacturer is divided into two types, namely the H-type and L-type, and is assumed to have access to bank loans and equity financing to ease the capital constraint. With the Nash game, it is found that (i) if remanufacturing is costly, the remanufacturer will choose partial remanufacturing and not enter into the remanufacturing market until the equity financing ratio excesses a certain threshold. (ii) A H-type remanufacturer is more flexible in term of market entrance than a L-type remanufacturer. (iii) The remanufacturer’s profit increases first and then decreases in the equity ratio. (iv) Equity ratio and interest rate have opposite effects on the pricing of the new and remanufactured products. Furthermore, with some research extensions, it is exhibited that the results and managerial implications developed in the paper hold well for different financing modes and the random demand setting, and hence are robust to a good extent.

Suggested Citation

  • Yanyan Zheng & Yingxue Zhao & Xiaoge Meng, 2021. "Market entrance and pricing strategies for a capital-constrained remanufacturing supply chain: effects of equity and bank financing on circular economy," International Journal of Production Research, Taylor & Francis Journals, vol. 59(21), pages 6601-6614, November.
    • Handle: RePEc:taf:tprsxx:v:59:y:2021:i:21:p:6601-6614
    DOI: 10.1080/00207543.2020.1821926
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    Cited by:

    1. Fu, Shuaishuai & Chen, Weida & Ding, Junfei & Zhang, Guoqing, 2023. "Is carbon asset pledge financing contributing to the operation of emission-dependent engineering machinery remanufacturing with emission abatement?," International Journal of Production Economics, Elsevier, vol. 266(C).
    2. Zheng, Yanyan & Zhao, Yingxue & Wang, Nengmin & Meng, Xiaoge & Yang, Honglin, 2022. "Financing decision for a remanufacturing supply chain with a capital constrained retailer: A study from the perspective of market uncertainty," International Journal of Production Economics, Elsevier, vol. 245(C).
    3. Arijit Bhattacharya & Shefali Srivastava & Abhijit Majumdar, 2024. "Circular supply chains in manufacturing—Quo vadis? Accomplishments, challenges and future opportunities," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4397-4423, July.
    4. Sun, Shuxiao & Hua, Shengya & Liu, Zhongyi, 2024. "Navigating default risk in supply chain finance: Guidelines based on trade credit and equity vendor financing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).

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