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Competitive strategy in remanufacturing and the effects of government subsidy

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Abstract

In this paper, we consider a single-period model comprised of an original manufacturer (OM) who produces only new products and a remanufacturer who collects used products from consumers and produces remanufactured products. The OM and the remanufacturer compete in the product market. We examine the effects of government subsidy as a means to promote remanufacturing activity. In particularly, we consider three subsidy options: subsidy to remanufacturer, subsidy to consumers, and subsidy shared by remanufacturer and consumers. We find that the introduction of government subsidy on remanufacturer or consumers always increases remanufacturing activity. We also find that subsidy to remanufacturer is the best subsidy option, because subsidy to remanufacturer results in lower price of remanufactured products, thus leading to higher consumer surplus.

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Acknowledgments

The authors thank the anonymous referees for their comments and suggestions. This research was supported by the Natural Science Foundation of China (Nos.71231007, 71373222, 71501149).

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Authors and Affiliations

  1. School of Economics and Management, Wuhan University, Wuhan, 430072, China

    Lu Xiao & Xianjia Wang

  2. Department of Systems Engineering and Engineering Management, City University of Hong Kong, Hong Kong, China

    Lu Xiao & Kwai-Sang Chin

  3. Xiangyang Sergeant School of Military Economy Academy, Xiangyang, 441118, China

    Yong Qin

Authors
  1. Lu Xiao
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  2. Xianjia Wang
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  3. Kwai-Sang Chin
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  4. Yong Qin
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Corresponding author

Correspondence to Lu Xiao.

Additional information

Lu Xiao is a Ph.D. candidate in School of Economics and Management at Wuhan University and Department of Systems Engineering and Engineering Management at City University of Hong Kong. She received her Bachelor Degree in management from Wuhan University in 2012. Her research interests are in the areas of remanufacturing, game theory, supply chain and operations management.

Xianjia Wang is a professor of the School of Economics and Management at Wuhan University. He received his Bachelor Degree in applied mathematics from Wuhan University in 1982, and PhD in systems engineering from Wuhan University in 1992. His research interests are in the areas of game theory, mechanism design, supply chain and operations management.

Kwai-Sang Chin is Associate Head and Associate Professor of Department of Systems Engineering and Engineering Management at City University of Hong Kong. He received his MSc(Engg) in industrial engineering from the University of Hong Kong in 1990, PhD in industrial engineering from the University of Hong Kong in 1996. He published over 200 journal papers and refereed conference papers, authored 8 books/book chapters, edited 4 books, and gave numerous invited talks and presentations. His research interests are in the areas of remanufacturing, quality management and decision analysis.

Yong Qin is an instructor at Xiangyang Sergent School of Military Economy Academy. He received his Master Degree in systems engineering from Wuhan University in 2014. His research interests are in the areas of evaluation and decision analysis.

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Xiao, L., Wang, X., Chin, KS. et al. Competitive strategy in remanufacturing and the effects of government subsidy. J. Syst. Sci. Syst. Eng. 26, 417–432 (2017). https://doi.org/10.1007/s11518-017-5345-5

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  • DOI: https://doi.org/10.1007/s11518-017-5345-5

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