Optimal strategies for trade-old-for-remanufactured programs: Receptivity, durability, and subsidy

Due to its environmental, financial, and marketing benefits, businesses and governments have increasingly embraced remanufacturing. However, the weak demand for remanufactured (reman) product severely hinders the implementation of remanufacturing. Lately, Trade-Old-for-Remanufactured (TOR) programs are growing in popularity as they can boost reman product demand. In this paper, we investigate the conditions when a firm should offer a TOR program and how to best implement it. Our main findings are: (1) Firms should offer TOR programs only when reman product receptivity and new product durability satisfy a certain condition; (2) In addition to the reman product receptivity, the new product durability also plays a significant role in motivating consumers to participate in TOR programs; and finally (3) High product remanufacturability and government subsidies are strong incentives for firms to offer their TOR programs. Our analysis provides insights for firms and governments on how to use TOR programs to benefit businesses, consumers, and the environment.