Analysing remanufacturing decisions of supply chain members in uncertainty of consumer preferences

ABSTRACT

This article formulates a gaming model of the closed-loop supply chain with manufacturers (as the leader), sellers and consumers where consumers may or may not be willing to pay remunerative price for remanufactured products vis-à-vis new products. In the model, manufacturers produce new as well as remanufactured products, whereas sellers distribute them. In stable circumstances, this article presents the functional formula of the optimal manufacturing pricing decisions. The results show that when the cost of new products is significantly lower than that of remanufactured ones, manufacturers choose to produce new products only. When the difference between cost of new and remanufactured products is moderate, manufacturers tend to produce both new and remanufactured products, and in some regions, production of new and remanufactured products is proportional to each other. When the difference between cost of new and remanufactured products is enormous, their production and sale tend to stop. Also, this article analyses the effects of varying cost of new and remanufactured products and the recycling rate on pricing decisions of supply chain members. This article contributes to the management of manufacturers’ and sellers’ remanufacturing decisions and also provides advice on how governments can guide consumer preferences.

KEYWORDS:

• Consumer preferences
• uncertainty of purchase willingness
• closed-loop supply chains
• gaming model
• remanufacturing
• production pricing decision

JEL CLASSIFICATION:

• C70
• D40
• C00

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This article is financially supported by the Natural Science Foundation of China [grant numbers 71172194, 71390330, 71390331 and 71221001]; the Project granted by Hunan Provincial Planning Office of Philosophy and Social Science in 2015 [grant number 15YB064].