Remanufacturing decision and sustainability under product life cycle uncertainty

Wenbo Shi, Tianke Feng and K. Jo Min

The Engineering Economist, 2016, vol. 61, issue 3, 223-243

Abstract: For a single type of product, we study a firm's remanufacturing decisions for the product under demand uncertainty from a real options approach. Specifically, we assume that the product life cycle consists of a growth regime with the expected product demand and volatility increasing with respect to time and a decay regime with the expected product demand and volatility decreasing with respect to time while the timing of regime change itself is uncertain as well. Under this framework, this study aims to derive and analyze the demand threshold above which the firm establishes a remanufacturing process in its production system. Moreover, the number of products being remanufactured throughout the life cycle is numerically studied to assess the degree of sustainability due to remanufacturing.

Date: 2016
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DOI: 10.1080/0013791X.2014.986352

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