Remanufacturing production decisions considering product life cycle and green consumers' scale in the circular economy

Abstract

PurposeIn this paper, the authors aim to study the optimal strategy of original equipment manufacturers (OEMs) considering both consumer segmentation and upward substitution of remanufactured products in the product life cycle.Design/methodology/approachIn this paper, the authors develop two remanufacturing models: the OEM remanufacturing model and the authorized remanufacturing model. Then, the authors study the impact of both green consumers' scale and the product life cycle expressed as the market growth rate on the OEM's optimal decision-making. Therefore, the authors derive the optimal solutions of the two models by using game theory.FindingsThe authors find that in the case of low market growth rate, when there only exist ordinary consumers, if the substitutability of remanufactured products produced by the OEM is below one threshold or above another threshold, the OEM can obtain higher profit in the OEM remanufacturing model, and vice versa. If the substitutability of remanufactured products produced by the OEM is below a threshold when there are both ordinary and green consumers, the OEM prefers the authorized remanufacturing model; and vice versa. Moreover, in the case of high market growth rate, the OEM prefers the OEM remanufacturing model only when the substitution-level in OEM remanufacturing model is above a threshold.Originality/valueThe present study fills the gap in existing researches by simultaneously discussing product life cycle and green consumers' scale. The authors provide manufacturers with a new basis for remanufacturing decisions.