Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 111, Issue 2, Pages 287-298Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2007.02.042
Keywords
remanufacturing; pricing; competitive strategy; reverse logistics; closed-loop supply chains
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In this paper, we analyze a two-period model of a manufacturer who makes and sells a new product and a remanufacturer who competes with the manufacturer in the second period. We examine the effects of government subsidies as a means to promote remanufacturing activity. In particular, we consider a subsidy proportional to remanufacturing volume that is paid solely to the remanufacturer, solely to the manufacturer, or shared among the firms. We find that the introduction of subsidies increases remanufacturing activity, and that the manufacturer's profits generally decrease while the remanufacturer's profits increase when 100% of the subsidy goes to the remanufacturer. We also find that a policy-maker should consider a subsidy scheme with some positive fraction of the subsidy paid to the manufacturer. Remanufacturing activity is generally higher and profits of both firms increase. In addition, subsidy sharing creates incentives for the manufacturer to design a product that is more suitable for remanufacturing, and to be more open to efforts to increase the return rate of end-of-life products. (c) 2007 Elsevier B.V. All rights reserved.
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