How Does Licensing Remanufacturing Affect the Supply Chain Considering Customer Environmental Awareness?

Zongbao Zou, Fan Wang, Xiaofan Lai and Jingxian Hong
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Zongbao Zou: Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou 510275, China
Fan Wang: Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou 510275, China
Xiaofan Lai: Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou 510275, China
Jingxian Hong: Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou 510275, China

Sustainability, 2019, vol. 11, issue 7, 1-23

Abstract: As sustainability issues are receiving increasing attention in society, in recent years many manufacturers have been adopting remanufacturing via technology licensing. This paper uses a game theory approach to investigate this strategy of a manufacturer under a closed-loop supply chain consisting of one supplier, one manufacturer, and one third-party remanufacturer (TPR), with the consideration of customer environmental awareness. In particular, the supplier supplies the components to the manufacturer and the manufacturer adopts technology licensing remanufacturing via the TPR. We explicitly characterize the reactions between the supplier and the manufacturer as being in equilibrium after adopting the technology licensing. We find that only when remanufacturing is a potential threat to the supplier is the performance of the supply chain improved and the double marginalization effect effectively eliminated. Moreover, remanufacturing by technology licensing only increases the profit of the manufacturer, but decreases the profit of the supplier. Interestingly, contrary to traditional wisdom, the existence of remanufactured products does not reduce the quantity of new products. Furthermore, remanufacturing by technology licensing may not always improve the environment, but customers in the market have environmental awareness that facilitates remanufacturing.

Keywords: technology licensing remanufacturing; third-party remanufacturer; customer environmental awareness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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