Symmetric or asymmetric? Value-added service design for new and remanufactured products under competition

Abstract

Remanufactured products, although seen as pro-environmental alternatives to new ones, may evoke consumer skepticism regarding quality. Value-added service provided to customers after purchase can efficiently alleviate this concern and inspire consumption. However, the inherent competition between new and remanufactured products in price and service raises a vital question on who should provide value-added services, and at what modes, in a supply chain. Using game-theoretic models, we examine four potential service modes: symmetric cases (Scenario M or R), where a manufacturer provides value-added services to both products or delegates the retailer to provide services, and asymmetric cases (Scenario MR or RM), where a manufacturer provides services to remanufactured products, leaving the new ones up to the retailer, or vice versa. We find that asymmetric cases result in the highest and the lowest service qualities; that is, the manufacturer (or the retailer) would provide the poorest (or the highest) service quality when the other party acts as a service competitor. In contrast, symmetric cases result in the highest and the lowest retail prices; that is, product competition stimulates service quality but does not necessarily intensify price competition. Additionally, when the service cost coefficient falls within a certain range, the retailer counterintuitively raises sales prices for both products even when the manufacturer undertakes service costs. Finally, the total revenues under asymmetric cases decrease due to the increased competing effect, whereas Scenario R generates the highest profits for both parties. However, for consumers, the asymmetric cases would be more beneficial.