Selection of best buyback strategy for original equipment manufacturer and independent remanufacturer – game theoretic approach

ABSTRACT

The study considers two supply chain members, an original equipment manufacturer (OEM) producing new and remanufactured products and an independent remanufacturer (IR) collecting used products of OEM and producing remanufactured products. Furthermore, OEM and IR are involved in competition to collect the used products by providing various exciting offers to the customers. A two period analytical model is developed to investigate the profitable buyback strategy for OEM and IR under low and high pricing strategy. In first period, OEM performs remanufacturing and considers a strategy to collect the product cores from end users under a certain pricing strategy. Under extensive game format, IR joins in the remanufacturing business to compete with OEM and based on OEM's attractive buyback strategy, IR adopts a profitable pricing strategy. The research addresses oligopoly market where OEM is not the single seller of new product and other sellers are interested in remanufacturing. In such scenario, OEM has less control over used products collection of other brand and OEM cannot restrict independent remanufacturer to venture within remanufacturing business. The findings of the study depicted that low pricing strategy “exchange offer” is profitable buyback decision for OEM and “incentive offer” is profitable buyback decision for independent remanufacturer.

KEYWORDS:

• Remanufacturing
• buyback strategy
• pricing strategy
• game theory
• price competition

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work of J. W. Wang was supported by the National Natural Science Foundation of China (NSFC) (Grant No. 71571156), by the 2019 Guangdong Special Support Talent Program – Innovation and Entrepreneurship Leading Team (China) (2019BT02S593), and by the open project funded by State Key Laboratory of Synthetical Automation for Process Industries (PAL-N201802).