Product and sales contract design in remanufacturing

Baris Yalabik, Dilip Chhajed and Nicholas C. Petruzzi

International Journal of Production Economics, 2014, vol. 154, issue C, 299-312

Abstract: We develop and analyze an economic model of remanufacturing to address two main research questions. First, we explore which market, cost, and product type conditions induce a profit-maximizing firm to be a remanufacturer, given a separate (secondary) remanufactured goods market. Such markets exist for consumer goods, where “newness” is a differentiating factor. Second, we describe what effect profitable remanufacturing has on the environment. Our stylized modeling framework for analyzing these issues incorporates three components: lease contracting, product design, and remanufacturing volume. To operationalize this framework, we model and solve for the optimal decisions of two firm types: a non-remanufacturer, which we call a traditional firm, and a remanufacturer, which we call a green firm. We describe conditions under which remanufacturing is (and is not) profitable, and demonstrate that under certain cost and market conditions remanufacturing has negative consequences for the environment. Our results have implications for firms and policy makers who would like to choose remanufacturing as a strategy to improve profitability and environmental performance, given the existence of conditions under which neither might occur.

Keywords: Product design; Remanufacturing; Green consumerism; Durable goods; Economic modeling (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:154:y:2014:i:c:p:299-312

DOI: 10.1016/j.ijpe.2013.09.008

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