Competition and refurbishing strategy in closed-loop supply chains considering collection priority

Abstract

When a brand manufacturer and an independent refurbisher (IR) both refurbish and compete, this paper introduces collection priority to allocate the limited used products (cores) between them, a mechanism that couples asymmetric collection caps with asymmetric refurbishing costs. We model this competition in a closed-loop supply chain where the manufacturer supplies both new and refurbished products while the IR supplies only refurbished products, and analyze five scenarios representing different refurbisher configurations and priority regimes. Four equilibrium regions arise under each collection-priority regime, with six distinct refurbishing strategy patterns across the two regimes. Within the partial-refurbishing region analyzed, we obtain the following findings. Adding more refurbishers does not necessarily improve profitability or reduce environmental impact. Under manufacturer priority, the IR’s refurbishing-entry decision is independent of the new-product cost; under certain conditions, the priority-holding manufacturer may have a stronger incentive to refurbish alongside an active IR than alone. We also examine several extensions: the main qualitative insights largely remain robust under uncertain refurbishable yield, sequential decision making, and a two-part refurbishing-cost structure, while endogenizing the acquisition of priority reveals that competing for it is not always worthwhile; under some conditions, acquiring collection priority is payoff-irrelevant.